- Tech earnings rattle. Weak earnings from Alphabet, Amazon and Intel rekindled AI concerns, sending broader equities lower. Safe-haven flows have dragged US yields and the US dollar index down, though the latter is still up on the month.
- RBNZ wrong-foots markets. The Reserve Bank of New Zealand surprised earlier in the week by holding rates. The kiwi fell 1.4%, its biggest daily decline this year.
- Fed to differ. The Fed left rates unchanged, with two dissents, as expected. The dollar’s muted reaction suggests a renewed advance requires stronger conviction around December-January tightening.
- Lagarde’s balancing act. A dovish European Central Bank statement pressured the euro at first, before hawkish comments from Lagarde helped steady the ship.
- BoJ’s hawkish nudge. The Bank of Japan stayed on hold but retained a hawkish bias, threatening carry trades and offering fresh support to the yen.
- Budget benign. Higher borrowing projections failed to unsettle gilts or sterling, suggesting markets viewed the UK’s fiscal revisions as manageable.
- Oil’s not well. Up over 12% this month, Brent crude remains near four-year highs as reports emerged that the US is preparing for a new military campaign against Iran following the US midterm elections.
- Mulling the midterms. Democratic sweep odds sit near 68%. Markets are weighing risks around fiscal gridlock, debt-ceiling tensions and AI sentiment.
Global Macro
Growth resilience keeps rate pressure alive
Fed pauses hawkishly. The Federal Reserve held rates at 3.75%–4.00%, but the 10–2 vote showed two officials preferred another 25bp hike. The statement retained its concern that inflation remains elevated, while Chair Kevin Warsh stressed the need for more information before the next move.
US economy accelerates. Q3 GDP expanded at a 3.4% annualized rate vs roughly 3.1% expected, up from 2.2% in Q2. Private domestic demand rose 4.9%, supported by consumer spending and another acceleration in investment, particularly AI-related equipment and data centers.
US inflation persists. Headline PCE accelerated to 3.6% y/y from 3.4%, while core PCE rose to 3.1% from 3.0%, both broadly matching expectations. Consumer spending grew 0.5% m/m, but income increased only 0.2%, pushing the savings rate down to 3.8% and keeping the sustainability of consumption in focus.
BoC resumes tightening. The Bank of Canada raised rates 25bp to 2.50%, ending seven consecutive holds as persistent energy costs threatened to spread into broader inflation. The Bank upgraded near-term growth but still expects US tariffs to slow activity in Q4.
Policy holds elsewhere. The European Central Bank held its deposit rate at 2.50%, citing stable underlying inflation but growing upside risks from energy costs. The Reserve Bank of New Zealand surprised with a hold at 2.75%, while emphasizing that inflation remains above its target range. The Bank of Japan also held at 1.25% as expected.
Australia inflation heats up. Australian CPI accelerated to 4.3% y/y from 4.0%, while trimmed-mean inflation increased to 3.6%. Housing prices rose 5.2% y/y, keeping the case for another Reserve Bank of Australia hike alive despite softer labor-market and confidence indicators.
Week ahead
Countdown to the midterms
All eyes on the midterms. The main event next week is less about the data and more about the polls, with the US midterm elections just days away (3 November). Will the Democrats retain control of Congress? What about the Senate? Markets may struggle to price the outcome in the immediate aftermath, but the longer-term implications could be significant. The result may shape policy direction on issues ranging from the Middle East conflict to AI regulation. But most importantly, would a blue sweep effectively turn the Trump administration into a lame-duck government?
US labour market in focus. The US jobs report is due next week, alongside the JOLTS and ADP releases. Together, they will provide a snapshot of the US labour market across September and October. As Fed Chair Warsh justified October’s decision to hold rates on the need for more data before determining the next policy move, these key releases will be scrutinised closely.
ECB hike bets face inflation test. The eurozone’s preliminary October CPI release is due next week. Consensus estimates point to a 0.1 percentage point rise to 3.9% from 3.8% in September, which would mark the highest level since 2023. An in-line or stronger-than-expected print would reinforce expectations of an ECB rate hike in December following October’s pause.
BoE set to deliver an insurance hike. The Bank of England holds its policy meeting, with markets expecting a 25bp rate hike. A more resilient macro backdrop, rising inflation amid ongoing tensions in the Middle East support those expectations. That said, we believe this may be more of an “insurance hike” for now, with limited guidance on any further tightening ahead.
FX views
AI anxiety lingers, offsetting hawkish Fed support
USD Dollar stays in demand. The US dollar index remained caught between two competing forces this week: a hawkish Fed on one side and shifting AI sentiment on the other. The Fed left rates unchanged, signalling that more data is needed before deciding its next move. Stronger-than-expected Q3 GDP growth and PCE data supported that stance. With September inflation surprising to the upside and the risk of further escalation in the Middle East still present, expectations for another hike are likely to remain sticky, helping to underpin the dollar. Meanwhile, doubts around the AI trade persist and remain the clearest downside risk to the greenback, as they redirect attention toward growth concerns and, in turn, a less hawkish Fed outlook. Next week, all eyes will be on the midterm elections. AI-related anxiety may be weighing particularly heavily ahead of the vote: a decisive Democratic victory would likely imply tighter AI regulation, reinforcing concerns over how much further the AI rally can run.
EUR France undercuts ECB support. The euro was weak across the board this week. There were no major budget developments on France’s front, yet investors remain highly sensitive to the country’s fragile fiscal backdrop. The euro’s bearish reaction, albeit short-lived, to this week’s ECB policy meeting underscored that vulnerability. While the Bank left rates unchanged, it acknowledged that the Mideast conflict is likely to add to inflationary pressures, while tighter financing conditions since the Governing Council’s last meeting are likely to weigh on growth. The reference to tighter financing conditions carried clear echoes of the France-driven bond selloff, reinforcing concerns that fiscal strains are constraining the ECB’s ability to maintain a hawkish stance. That is precisely what markets fear. Yet again, it serves as another reminder of how little support a hawkish ECB can offer the euro under current circumstances. EUR/USD fell to a fresh 18-month low of 1.1105 this week before paring its losses. The pair now looks set to test 1.12, although capped by the 21-day moving average, while the 1.11-1.1150 area offers support.
GBP From Budget to BoE. The UK Budget proved largely uneventful from a market perspective – borrowing plans remained contained and gilt markets responded positively. For sterling, the absence of a negative surprise was arguably the best outcome possible. The standout move came in GBP/EUR, which climbed to fresh 18-month highs, within touching distance of 1.20, a level the cross has occupied less than 10% of the time over the past decade. French fiscal concerns have been a key catalyst here too. Against the dollar, GBP/USD extended its recovery from the 2026 lows near 1.31 reached earlier this month, climbing back above 1.34. The move was helped by softer US yields and renewed pressure on the dollar following weakness in the technology sector. Technically, the pair is approaching its 200-day moving average, which now represents an important resistance level and the next test for sterling bulls. Sterling enters next week with momentum improving. However, much of the recent strength still reflects relative advantages rather than outright UK exceptionalism, leaving incoming data and an expected BoE hike as key tests.
CHF Safe haven boost. The franc continues to draw support from both wider OAT-Bund spreads and the broader unwind of crowded AI-linked trades, which has boosted demand for defensive assets. Switzerland remains the preferred destination for safe-haven flows during periods of European political stress, suggesting French election risks could continue to underpin the franc into next spring. Beyond politics, the fundamental backdrop may also be turning more supportive. Markets have aggressively repriced ECB-SNB policy expectations in recent months, inflation risks are beginning to tilt modestly to the upside in the SNB’s own assessment, and the franc no longer appears materially overvalued. Another positive catalyst to consider is the unwinding of carry trades in a more volatile FX climate, which would support the franc given it’s a key funding currency. EUR/CHF has dropped for seven weeks straight (down over 5%) and trades below all key daily and weekly moving averages in a sign of bearish momentum. USD/CHF has also dropped almost 2% this month with 0.815 a downside target in the near term.
CAD Hawkish hike underwhelms. USD/CAD is trading near 1.398 after the Bank of Canada raised rates 25bp to 2.50%, its first hike in more than three years. The Loonie’s modest reaction reflects doubts over how far the Bank can tighten, with core inflation close to 2%, a soft labor market and US tariffs weighing on exports and investment. Carry still favors the greenback, as the US-Canada two-year yield gap remains near 129bp, while the 10-year spread sits around 116bp. The USD/CAD is testing the lower half of its three-month range, with a sustained break below 1.39 depending on domestic macro validation or lower US yields; a recovery above 1.4050–1.4100 would suggest that the post-BoC decline has run its course. Next week, Canada’s PMIs, trade balance and federal budget will shape the domestic outlook before Friday’s labor report, where another weak print after September’s 68,300 job loss would challenge the Bank’s hawkish message and renew pressure on CAD.
AUD Aussie braced for another rate rise. Stronger Q3 inflation has us expecting the RBA to lift rates on November 3rd . Market is currently pricing in 79% likelihood of the rate hike. We see risks leaning toward more: two further hikes, taking the cash rate to 5.10%, look likelier than a hold at 4.60%. Any follow-up move fits February 2027 better than December, once fresh forecasts land. We will watch the November vote split, and whether officials flag Q3 GDP and October inflation as triggers. A softer US dollar and falling US yields give the Aussie room to climb, though shaky tech sentiment caps the upside. AUD/USD finds immediate support at the 21-day EMA of 0.7014, with resistance at key psychological handle of 0.7100.
CNH China’s factory profits shift up a gear. China’s industrial profits jumped 14.4% from a year earlier in September, up from 4.2% in August and the fastest pace since June. Profits rose 15.5% over the first nine months, led by computer and electronics makers, where profits more than doubled, up 103.8%. Still, exporters face rising uncertainty abroad, while weak spending at home squeezes firms that rely on local demand. A softer US dollar and lower US yields keep USD/CNH near its 12-month low, while firmer factory profits lend the yuan support. USD/CNH holds just above its 30 October low of 6.6537. A break above the 21-day EMA at 6.6795 would put the 50-day EMA at 6.7005 in focus. The next key resistance will be at 100-day EMA of 6.7333.
JPY Yen supported as BoJ signals more. Japan’s consumer confidence slipped 0.4 points to 35.0 in October, with all four components weakening. Appetite for big-ticket purchases fell 0.5 points to 26.8, while 90.8% of households expect prices to rise over the next year. A weaker US dollar and falling US yields weigh on USD/JPY, while expectations for further BoJ rate hikes add to the pressure. USD/JPY holds near 157.42 after the BoJ held at 1.25%, as expected. The decision passed by an 8-1 vote and the BoJ maintained a tightening bias, raising its inflation outlook and highlighting risks from wage-price dynamics and inflation expectations. The central bank also excluded the proposed food-tax cut from its forecasts, reinforcing the case for further policy normalisation. The pair is about 4% below its 23 July high of 163.99. Resistance sits at the 50-day EMA of 157.92 and the 100-day EMA of 158.31, with key support at 157.00. Meanwhile, SGD/JPY and EUR/JPY are at one-week highs.
MXN Carry edge erodes. USD/MXN is trading near 18.8, its highest level in three months and almost 12% above the September low, as Banxico easing expectations and firm US yields continue to undermine the peso’s former carry advantage. Mexico’s two-year yield premium over the US has narrowed to roughly 290bp, leaving MXN more exposed to shifts in global risk appetite and dollar demand. Early-October inflation offered some resistance to the dovish policy view, with headline CPI at 3.62% y/y and core inflation surprising higher, but a majority of Banxico’s board remains open to cutting rates if price pressures ease. Record asset-manager short positioning confirms the bearish trend, although crowded exposure also leaves room for a sharp peso rebound on any positive trade or policy surprise. From a technical perspective, a sustained break above 18.8 would bring the key 19 resistance level into view, while 18.50 and 18.20 provide initial support. Next week, attention turns to Mexico’s manufacturing surveys before the November 5 Banxico meeting, where an unexpected cut or dovish guidance would reinforce the USD/MXN advance.
BRL Fiscal risk returns. USD/BRL is trading near 5.40 after surging almost 9% from the October 23 low near 4.98, as post-election fiscal concerns overwhelmed one of the widest carry cushions in emerging markets. Brazil’s two-year yield premium over the US remains above 800bp, while October FX inflows reached $8.65bn, but those supports have not offset doubts over the government’s fiscal targets and the direction of policy after the election. The expected continuation of Copom easing adds pressure, especially with inflation still forecast above the 3% target and growth estimates being revised lower. The charts show that the break above the former 5.00–5.22 range marks a clear deterioration, with 5.41 as immediate resistance and 5.50 next; initial support sits around 5.20–5.25. Next week, attention turns to the November 4 Copom meeting, where a 25bp cut would take the Selic rate to 13.50%, followed by industrial production and trade data. The statement’s guidance on further easing will determine whether USD/BRL extends toward 5.50 or begins to retrace the post-election spike.
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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.
