FX OVERVIEW
Policy divergence is driving the clearest currency moves: the RBA’s dovish turn has hit the Australian dollar, while expectations for further BoE tightening are supporting sterling. Geopolitical risk around Iran is sustaining safe-haven demand and energy volatility, leaving the dollar supported but not dominant; oil’s rebound is also helping the Canadian dollar.
MAJOR PAIRS
AUDUSD — The RBA’s expected 25bp hike to 4.85% failed to support the aussie: policymakers dropped forward guidance on further hikes, and the 6–3 vote split and weaker economic outlook reinforced the dovish pivot. The pair is bearish below 0.7008–0.7058, with support at 0.6977 and then 0.6896.
EURUSD — The pair remains range-bound around 1.1180–1.1220 as ECB hawkishness and dollar weakness from US election uncertainty compete with French fiscal risk, weak German retail data, and energy volatility. A close below 1.1135 would undermine the cautious bullish case; 1.11 remains key support, while 1.1275 is a potential topside test if ECB expectations hold.
GBPUSD — BoE rate-hike expectations and a widening UK–US rate differential support sterling, with the pair holding above 1.3379. Resistance is at 1.3435; a hawkish BoE message could open a move toward 1.3558, while a cautious outlook would put the rally at risk.
EURGBP — The pair has fallen to 0.8336 as expected BoE tightening contrasts with the ECB’s pause and the eurozone’s fiscal and energy vulnerabilities. The bias remains lower while the policy divergence favours sterling.
USDCAD — Higher crude prices and the reported surprise BoC hike are supporting the Canadian dollar, while reduced Fed-hike expectations limit USD support. The near-term bias is lower, though the pair remains range-bound; a break above 1.4051 would challenge that view and expose 1.4299.
USDJPY — The market summary points to yen underperformance amid policy divergence and highlights 158.60 as a key psychological level. A move higher depends on continued yen weakness; the supplied news provides no direct BoJ signal to confirm that view.
USDCNY — The PBOC set its central rate at 6.7150, above the 6.6489 consensus estimate. The fix signals active management but, at that level, does not itself indicate support for the yuan; the pair’s direction remains dependent on subsequent PBOC settings and broader dollar sentiment.
USDKRW — The pair has stabilized after finding a short-term low near 1,320. Resistance at 1,349–1,353 is decisive: a sustained break would improve the upside case, while rejection could bring 1,320 back into view.
USDSGD — The pair is expected to remain within 1.2760–1.2850, with a firm SGD NEER premium supporting the Singapore dollar but risk aversion and portfolio outflows limiting follow-through. The near-term bias is neutral.
EURCHF — Technicals have deteriorated, with a break below support putting the 0.9095 May low in focus. The euro’s fiscal and energy risks keep the bias lower.
CENTRAL BANK WATCH
- RBA: The expected 25bp increase to 4.85% was overshadowed by a dovish shift. The bank removed guidance on future hikes; the 6–3 vote and weaker housing and labour outlooks point to a pause.
- ECB: Policymakers reiterated that the October pause is not an easing pivot, keeping a possible December hike in play.
- BoE: A 25bp hike to 4% is widely expected on Thursday. Bailey’s guidance will determine whether markets retain expectations for further tightening.
- BoC: The supplied news reports an unexpected 25bp hike and a more hawkish tone from Governor Macklem.
- PBOC: The central rate was set at 6.7150, above market consensus, underscoring active management of the yuan.
- MAS: No policy shift is expected after October’s decision; the SGD NEER remains in the upper half of its band.
MACRO DRIVERS
- Iran-related escalation is reviving energy-supply concerns and supporting safe-haven demand; oil and European gas have swung sharply with headlines.
- Policy divergence is favouring sterling over the euro and weighing on the Australian dollar after the RBA’s dovish turn.
- Crude’s rebound supports CAD, while falling Fed-hike expectations temper the dollar’s rate advantage against the Canadian dollar.
- US election uncertainty is pressuring the dollar at the margin, but geopolitical risk and flight-to-quality flows are limiting the downside.
POSITIONING IDEAS
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Bullish
- GBPUSD — BoE tightening expectations and a wider UK–US rate differential support sterling; a hawkish press conference could trigger a break above 1.3435.
- GBPCAD — Relative BoE–BoC policy expectations favour sterling, though oil strength is a counterweight to the CAD leg.
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Bearish
- AUDUSD — The RBA’s removal of hike guidance and weaker economic outlook leave the pair vulnerable below 0.7008–0.7058.
- EURGBP — BoE tightening expectations and eurozone fiscal and energy risks favour further downside from 0.8336.
- EURCHF — The break in technical support leaves the 0.9095 May low exposed.