- Volatility brews. There’s been a pick-up of volatility across markets this week as Presidents Trump and Xi finally met to talk trade, while central banks surprised.
- Cutthroat hawkery. Taking some of the fizz out of risk appetite, the Fed rate cut leaned hawkish. Chair Powell’s said a December cut was not a “foregone conclusion“. That prompted a re-assessment of the Fed easing cycle, boosting the USD.
- Mixed spells. Both the European Central Bank and Bank of Japan kept rates steady this week, offering no real surprises. However, the Bank of Canada’s cut was accompanied by signals that the end of its easing cycle is approaching.
- Truly great. This is how President Donald Trump described his much-anticipated meeting with Chinese President Xi Jinping offering further support to the greenback amid hopes of trade thaw between the world’s two largest economies.
- AI boom. Equity investors are largely looking through those events, though, to the real news: the AI boom is alive and kicking and broadening well beyond US borders.
- Tech earnings. Reinforcing this theme, Apple forecast a blockbuster holiday season, and Amazon’s cloud unit posted its strongest growth in nearly three years.
- Horror show. The pound’s abysmal October is ending with one of its worst weeks against the USD in 10 months. Sterling also dropped to a 2-year low versus the euro amid brewing fiscal fears and rising BoE easing bet.
Global Macro
Fed cuts despite driving in the fog
December repricing. The Fed cut rates by 25 bps as anticipated to 3.75–4.00. The Fed also announced it will halt balance sheet runoff starting December 1, ending a two-year unwind that shaved over $2 trillion from its holdings. Again, it was the Fed’s presser that brought in the volatility, as Powell cautioned the December meeting is still “far from a foregone conclusion.” The US dollar remains in firm demand after the hawkish comments.
US government shutdown. The government shutdown shows no signs of ending, and with month-end approaching, pressure on Congress is intensifying. The Fed has noted rising confidence in alternative data sources to guide policy, though these remain far from ideal. From here, the Fed may opt for a ‘two and through’ approach, pausing further action until the shutdown is resolved. It’s now on track to surpass the 2013 record of 35 days.
US-China. Trade tensions have eased as President Trump and President Xi Jinping agreed on a trade truce, Trump announced that the U.S. will reduce the so-called “fentanyl tariff” on Chinese imports from 20% to 10%. In a move described as “escalating to de-escalate,” Beijing has flexed its leverage over rare earth exports. In exchange, China will begin purchasing “massive amounts of soybeans” and other agricultural products, according to Trump.
Central banks action. The Bank of Canada cut rates as expected to 2.25%, hinting to the end of easing cycle, after 275 bps of rate cuts since 2024. The Bank of Japan held rates at 0.5% as expected, although two dissents signal that a hike at the December meeting is still possible. The European Central Bank held rates at 2.15% as expected.
Week ahead
Reading between the releases
Foggy start for US jobs data. Amid the ongoing data shutdown, the start of the month will offer only a limited snapshot of the current state of the US labour market. Key releases to watch include ADP and Challenger, Gray & Christmas data – both providing partial insight while official government figures remain offline.
Sentiment in focus. US ISM PMIs are out, offering a valuable gauge of economic sentiment – especially in the absence of the government’s usual gold-standard data. With a strong forward-looking tilt, keep an eye on the prices paid component and new orders, which may offer clues on inflationary pressures and demand momentum.
BoE cut: December looks more likely. Despite a softer-than-expected inflation print earlier this month, markets remain unconvinced the Bank of England will cut rates next week. December appears more plausible. With the OBR expected to release a worse-than-anticipated productivity downgrade around the November budget, the odds of at least one more cut by year-end remain high – and perhaps underpriced. Currently, markets are pricing in roughly 15 basis points of easing.
Germany’s grit still missing. Germany’s September industrial production and factory orders are due. Following disappointing August figures and Q3 GDP growth that signaled stagnation, these releases will help assess whether the economy is still struggling to convert fiscal stimulus enthusiasm into tangible output. So far, the grit hasn’t materialized.
Labour supply: Powell’s quiet signal. Although not being released due to the shutdown, the labour force participation rate is gaining prominence. Powell has emphasized that recent softness in the labour market is more about supply constraints than waning demand. Once the shutdown lifts, tracking this variable will be crucial to understanding the true dynamics at play.
FX Views
Eased, not eased up
USD Dollar digs in as Fed hedges. The dollar firmed this week on easing trade tensions – deals/truces South Korea and China – and a second Fed cut. The move echoed September: precautionary, with a cautious tone and hawkish tilt. While the cut was framed as risk management amid the ongoing shutdown, Powell expressed confidence in alternative data, citing resilient growth, somewhat elevated inflation, and a gradually softening labour market – driven more by supply-side shocks (notably immigration policy) than demand. December remains “far from a foregone conclusion,” prompting a repricing of easing bets. The dollar index rose 0.6% week-to-date, reinforcing our bullish stance for the month (up almost 2%). We expect consolidation in the high 98s for now. Shutdown dysfunction remains masked by trade optimism and a stock rally, while Powell’s reliance on alternative data has dulled urgency for immediate resolution. Still, sentiment remains fragile. Only a lifting of the shutdown would truly validate the dollar’s resilience. If official government data confirms economic strength, we see scope for a sustained push into the 99s. Otherwise, softer data and a more assertive dovish pivot could trigger more meaningful losses.
EUR Stuck in the shallows. The euro is set to end the week ~0.5% below the dollar, while nearly 1% higher against a bruised sterling – though it contributed little to either move. Late-week macro data offered scant support: initial buzz around strong Q3 GDP at the aggregate level – and in standout cases like France – was dampened by Germany’s flat print, with the bloc’s largest economy heading into a year of stagnation. Not that eurozone macro has moved the needle much for the common currency lately. The Fed meeting was the euro’s most prominent bearish driver, with EUR/USD dropping nearly 0.5% in a single session. Meanwhile, the ECB meeting was uneventful. Lagarde reiterated the ECB’s comfort with current rate levels, having left rates unchanged for the third consecutive time. The decision was widely anticipated, and the market reaction predictably subdued. The tone emphasized a meeting-by-meeting approach, avoiding any pre-commitment to a defined rate path. Overall, the euro is set to float timidly around the lower end of 1.16 – treading water, with little ahead to justify a confident move higher. Once the U.S. shutdown lifts, official government data will provide the next meaningful directional impulse for EUR/USD.
GBP More pain to come. The British pound has endured a bruising October, down over 2% against the US dollar and is suffering its worst week since early January – printing a fresh 7-month low. It is plumbing two-year lows versus the euro and on track for its longest monthly losing streak against the common currency in nine years. The selloff reflects deepening fiscal concerns ahead of the UK Budget and growing expectations of Bank of England rate cuts. Investors brace for potential tax hikes and spending cuts that could further slow the economy. The UK’s fiscal watchdog is expected to deliver a sharp downgrade to productivity growth, too, making it harder for Chancellor Reeves to meet her fiscal rules. Out of a basket of 50 global currencies we track, the pound has appreciated against just 2% this month — its worst performance since September 2022. Options markets are flashing red too. The implied volatility spread between 2-month and 1-month GBP options spiked in early October as traders priced in Budget-related risk. But as the event drew nearer, that risk shifted into the front-end, collapsing the spread in one of the sharpest one-day moves in over three years. The signal is clear: markets view the Budget as a near-term volatility driver, with sterling exposed to further weakness.
CHF Peaks in sight or blinders on?. EUR/CHF has recently rebounded alongside improving risk sentiment. It is noteworthy that last week the pair failed to break decisively below the April low — the period when the SNB resumed FX intervention after a 15-month pause. This suggests that a new support level may have been established for the pair. Rather – perhaps the franc has peaked? The franc’s strength is a significant concern for the SNB. Although the central bank has so far resisted pushing interest rates further into negative territory, it may need to impose costs on investors holding the franc to discourage its appeal as a safe-haven currency. More aggressive FX intervention is another policy tool that could already be in use. USD/CHF is still down over 11% year-to-date despite the dollar’s recent rebound and the franc’s low yielding status. Looking ahead, key focus will be on upcoming Swiss economic data and any signals from the SNB regarding future policy moves, especially as global risk sentiment evolves.
CAD Rollercoaster drive. A similar setup is unfolding to the September double-header between the Bank of Canada and the Fed. Back then, a dovish BoC and a hawkish Fed press conference pushed USD/CAD above 1.40. This time, USD/CAD dipped below 1.39 following the BoC’s expected rate cut, as markets weighed the end of Canada’s easing cycle against a Fed that still has room to normalize in upcoming meetings. However, Powell’s signal that the December meeting isn’t locked for another cut led markets to reprice the odds of a ‘two and through’ scenario, sending USD/CAD as high as 1.401. If demand for the U.S. Dollar holds and labor data doesn’t point to weakness, the Loonie will remain under pressure. In Canada, next week’s employment report is expected to reinforce the central bank’s view of a slowing economy and soft labor market. The government is set to meet to decide on the federal budget. With a minority in power, there’s a chance it won’t secure a majority vote, potentially triggering a federal election.
AUD Inflation overshoots RBA forecasts. Australia’s Q3 inflation surprised to the upside, with headline CPI rising 1.3% quarter-on-quarter and the trimmed mean up 1.0% — both well above consensus and the RBA’s own projections. The upside surprise was driven by higher electricity prices and continued strength in market services and housing. This result is especially significant in light of recent comments from RBA Governor, who said a trimmed mean CPI of around 0.9% or higher would represent a “material miss.” The 1.0% print clearly meets that threshold, reducing the likelihood of a near-term rate cut. Market is currently not pricing in any rate cut for Nov 4th RBA meeting. The next key support level for the pair lies at 100-day EMA of 0.6522, followed by key psychological handle of 0.6500. AUD/USD is currently 2.3% below its recent high of 0.67078 on September 17th. Market participants will closely monitor upcoming building approvals, the RBA rate decision, the RBA monetary policy statement, and the trade balance.
CNH China’s factory profits roar back. China’s industrial profits roared back in September, jumping 21.6%—the fastest pace since late 2023 and a clear acceleration from August’s 20.4% rise. The rebound was powered by high-tech manufacturers, whose earnings soared 26.8%, and by government efforts to rein in price wars, helping large firms lift year-to-date profits to 3.2%, up from just 0.9%. The upbeat data comes as diplomatic signals also turned positive. The Trump-Xi meeting ended with warm remarks: fentanyl tariffs were trimmed to 10%, China agreed to boost soybean purchases, and Trump is set to visit China next year. On the currency front, USD/CNH is now 0.4% above its recent low of 7.0851, recorded on September 17. The next resistance levels for the pair will be 21-day EMA of 7.1213, followed by the 50-day EMA of 7.1334 and 100-day EMA of 7.1549. If momentum fades, the next support sits at 7.1000. Market participants will be attentive to the release of Caixin manufacturing and services PMIs, as well as the trade balance.
JPY BoJ holds, but hawkish voices emerge. The Bank of Japan kept its benchmark rate at 0.5%, as expected. The vote split 7–2, with Takata and Tamura advocating a hike to 0.75%. Takata said the inflation target had been met, while Tamura argued for a move toward neutral rates. The BoJ signalled openness to future hikes if economic and price trends support it but cautioned against premature conclusions. It maintained its inflation outlook, projecting core CPI at 2.7% in 2025, 1.8% in 2026, and 2.0% in 2027. Growth forecasts edged up for 2025 to 0.7%, while 2026 and 2027 held at 0.7% and 1.0%. Policymakers flagged persistent uncertainty, especially around global trade. Traders now see a 47% chance of a December rate hike. In USD/JPY, dollar buyers may eye support near 151.73 (21-day average), with the next level around 150.11 (50-day average). Traders will also watch for the upcoming monetary policy meeting minutes and household spending data.
MXN Breaking above 18.5. The Mexican peso traded past 18.5 per US dollar, its lowest level since the beginning of October. This decline occurred as markets began pricing in a more dovish path for Banxico. The peso’s slump this week, along with that of most emerging-market assets, was accelerated after Federal Reserve Chair Jerome Powell dampened expectations for a December rate cut. Domestically, Mexico’s GDP contracted 0.3% quarter-on-quarter in Q3, only the second quarterly contraction since early 2021. This was driven by a roughly 1.5% drop in industry output amid US auto tariffs, stalled services activity, and an ease in annual growth to about 0.2%. Struggling against a stronger US dollar this month, the peso failed to find lower support. After consolidating around 18.4 for most of October, it found fresh weakness at month-end, trading above its 50-day Simple Moving Average (SMA) and the key technical resistance level of 18.5. Attention now turns to Banxico’s meeting next Thursday, where the central bank is widely expected to cut rates by 25 basis points (bps) to 7.25%.
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
