- Record peaks. Global equity markets continue to defy gravity, notching fresh record highs this week. Gold and Bitcoin, both of which have notched multiple record highs too, continue to attract flows as alternative stores of value.
- US data hiatus. The US government shutdown has muted one of the market’s key dollar-bearish narratives — a softening labour market — by halting fresh jobs data and leaving traders with little incentive to sell the US currency.
- FX recalibration. Meanwhile, rising political risks in Japan and France have triggered broad repositioning across the majors. Traders are pulling back from upside bets on the euro and yen, signaling reduced confidence in their near-term strength.
- Takaichi trade. JPY remains under pressure, down over 3% this week, as Takaichi’s surprise victory in Japan’s ruling party leadership race fuels expectations of slower rate hikes by the Bank of Japan.
- French politics. EUR/USD has suffered its worst week in 11 months. Investors are more inclined to hedge against euro weakness than strength in the near term as France’s deepening political risks revive market unease across Europe.
- Jumbo cut. The bigger-than-expected rate cut (50 basis points) in New Zealand dragged down the local currency, with AUD/NZD jumping to a fresh 3-year high.
- Next week. Despite no end in sight for the US government shutdown, the BLS plans to release the CPI report – a key risk event that will shape Fed policy expectations.
Global Macro
Animal spirits keep risk-on sentiment
FOMC minutes. In the absence of major macro data, markets were focused on the release of the September FOMC minutes, which suggest that while some members see tariffs as a key inflation driver, others believe inflation remains elevated even without them. To assess labor market shifts, the Fed is watching indicators like unemployment, job vacancies, wage growth, and quit and layoff rates. Overall, the tone leans cautious, implying that further rate cuts may hinge on clearer signs of labor market softening. Given the data blackout, markets are still expecting two rate cuts by the Fed this year, which has given room to the risk-on sentiment to prevail in markets.
Historic rally. Gold and silver have hit new all-time highs this week. Silver’s rally appears to be riding the momentum of gold’s rise, which seems fueled more by speculative enthusiasm than by traditional drivers like inflation protection or concerns over currency debasement.
Unexpected win. The Japanese Yen tumbled after Takaichi’s surprise win, which raised hopes for more fiscal stimulus and dampened expectations of a near-term BoJ rate hike. Gold and Bitcoin hit record highs in JPY terms amid the uncertainty. Though Takaichi once criticized rate hikes, her recent tone has softened, suggesting a full return to “Abenomics” is unlikely with the LDP now a minority government.
RBNZ jumbo cut. The New Zealand dollar fell sharply after the Reserve Bank of New Zealand delivered a surprise 50-basis point rate cut, citing a mid-year economic slowdown and a negative Q2 GDP print. The RBNZ signaled openness to further easing, pushing AUD/NZD to its highest level since September 2022.
Political turmoil. France’s political turmoil deepened as Prime Minister Sébastien Lecornu resigned less than a month into the role, echoing his predecessors’ struggles to pass a budget through a divided parliament amid unpopular fiscal reforms.
Week ahead
Data fog, policy friction
Soft jobs, sticky inflation The UK jobs report is due, potentially lending data-driven support to BoE’s Mann, who recently remarked that the labour market is on a softening path. The Bank remains torn between sticky inflation and a stagnating economic backdrop.
ZEW in the crosshairs The ZEW index will be key to gauging sentiment in Germany, the bloc’s largest economy. Following disappointing industrial production and factory orders, sentiment may be poised for a further hit.
Final prints, final clues? Final prints on key eurozone members and the bloc itself will be scrutinized, especially around a time when the ECB is particularly focused on inflation, and its evolution to decide whether one more cut by year-end is warranted or not. Upside risks to inflation – mostly linked to the fragile geopolitical backdrop – were what kept the ECB from cutting rates in September, according to the minutes.
Shutdown fog clouds Fed path There’s still no sign that the US government shutdown will be lifted soon. With key releases likely delayed next week, it’s becoming harder for the Fed and investors to assess the policy path ahead. That said, the BLS is preparing to release the CPI report on Wednesday, offering some respite in this data-blank stretch.
FX Views
Greenback gains, euro strains
USD Greenback gains ground. It was a strong week for the dollar, with the dollar index climbing to over 1.3%. This move was less about dollar strength per se, and more about weakness in the JPY and EUR – the two largest constituents of the index – both of which saw political risk premiums build, indirectly supporting the dollar. A second bond sell-off, just months after the late-summer episode, also contributed to a risk-off environment, prompting safe-haven flows into the dollar. Meanwhile, the government shutdown continues, depriving investors of key economic data – particularly on the labour market, which has recently shown signs of softness. Should the shutdown end and labour indicators confirm further weakness, the dollar is bound to pare some gains. While the Fed minutes this week maintained a cautious tone, the bank remains open to further cuts, conditional on incoming data. With no data available due to the shutdown, however, we expect the dollar to remain bid for now.
EUR Euro on edge. The euro was hit hard on the sentiment front this week – one of the worst-performing G10 currencies, second only to JPY. The main event was French Prime Minister Lecornu’s surprise resignation – just weeks after being nominated by Macron. Against an already fragile political backdrop, a highly fragmented parliament has paralyzed policymaking, particularly around the 2026 budget amid rising debt levels. Against the dollar, the euro fell over 1%. EUR/USD one-week and one-month risk reversals- a key barometer of currency sentiment – dipped into negative territory for the first time since late July, suggesting that investors are more concerned with hedging against euro weakness than positioning for strength relative to the dollar. Meanwhile, the US government shutdown has silenced the very macro data releases that had supported the euro in the second half of the year. With no fresh US data to lean on, investors were forced to reassess sentiment toward the common currency. This means that, moving forward, the common currency remains more dependent than ever on the US story alone.
GBP Brewing downside risks. The pound briefly hit a 3-week high versus the euro on renewed French political instability but quickly reversed, slipping back below €1.15 and remaining stuck in its year-to-date downtrend. Outside a sharp 2% gain against the yen, GBP softened broadly, with GBP/USD down over 1% — its worst week since January — as dollar strength returned. With no fresh US releases to guide sentiment, investors are reassessing sterling’s outlook, which hinges more heavily on US developments. That said, although volatility in sterling has been subdued, the two-month tenor of implied vol shows a clear uptick ahead of the UK’s Nov. 26 Budget, flagged as a potential flashpoint. Risk reversals confirm rising demand for downside GBP protection too, especially in two months time, suggesting traders are quietly bracing for fiscal surprises. In the nearer term, the UK’s official jobs report will be a key focus for markets, offering fresh insight into labour market resilience and helping shape expectations for Bank of England policy. With sterling’s yield advantage under scrutiny, any signs of softness could challenge its appeal. The next downside target for GBP/USD resides at its 200-day simple moving average at $1.3173.
CHF Overvalued. The Swiss franc is flirting with a 2-month low against the US dollar as safe haven demand fades. The franc’s relentless rally over the past few years has finally triggered a response from the SNB, which is now actively selling CHF and softening its tone to remind markets that currency strength isn’t a one-way bet. Despite this shift, rates traders remain unconvinced, with swaps still showing little appetite for sub-zero cuts – even as inflation gives the SNB room to lean more dovish. Still, the franc looks overvalued, with rate differentials and options pricing suggesting EUR/CHF fair value is closer to parity. Two-year spreads and three-month risk reversals point toward 0.96, implying scope for a meaningful retracement. We expect any SNB intervention to remain defensive around the sticky 0.93 level, and if it reinforces its FX push with modest negative rates, it could restore balance.
CAD 1.40 again. The USD/CAD has held impressively steady this week, especially compared to the sharp moves seen in the euro and yen, both hit by political turbulence that’s weighed on their performance and lifted the US dollar. While the Loonie had been largely insulated from this broader FX volatility, a fresh wave of USD buying Thursday morning drove the USD/CAD up to 1.40, a level not touched since May this year. That 1.40 mark is not just psychological, it lines up really close with the 200-day SMA at 1.399, adding technical weight to the move. With no major macro releases expected in the Eastern Time zone on Thursday, the dollar’s strength appears driven by ongoing euro softness. Also, the US government data shutdown has further supported the bid tone, while a flight to safe-haven assets, led by the US Dollar and precious metals, has pressured G10 currencies broadly lower against the Greenback. Friday morning, a surprising solid jobs report provided some relief for the CAD, which dropped below the 1.40 mark. However, the Loonie will likely still face pressure if the US Dollar maintains its upward momentum, as the path of least resistance for the USD remains bullish in the absence of fresh data coming out of the US. On the trade front, the anticipated meeting between President Trump and Canadian Prime Minister Mark Carney offered no new details on a potential trade deal.
AUD Aussie inflation fears linger. Australian inflation expectations have climbed to a four-month high, with the Melbourne Institute survey showing a rise to 4.8% in October. This uptick keeps inflation concerns front and center for the RBA, which recently left rates unchanged at 3.60%. Persistent cost pressures, especially from reaccelerating rents, suggest inflation could remain sticky. On the technical front, AUD/USD has managed to hold above the 0.6534-0.6550 breakout support, despite a pullback from the 0.6683-0.6707 resistance zone. Next key support is at 100-day EMA of 0.6526. Looking ahead, traders will focus on the RBA meeting minutes, NAB business confidence, and key labor market data for further direction.
CNH Golden Week disappoints. China’s Golden Week holiday failed to deliver the expected boost to consumer spending, with retail and dining sales rising just 3.3% year-on-year—well below forecasts and last year’s pace. This lackluster performance underscores ongoing weakness in domestic demand, despite recent stimulus efforts and an extended holiday period. USD/CNH has weakened, with next key resistance at 50-day EMA of 7.1447 and 100-day EMA of 7.1657. The next key level of support will be at 7.1200. Market participants will be closely watching upcoming trade balance, new loans, CPI, and PPI releases for signs of stabilization or further weakness in the Chinese economy.
JPY USD/JPY at eight-month high. The Bank of Japan faces a delicate balancing act as it weighs the prospect of further rate hikes against a backdrop of softening economic data and subdued inflation. Japan’s new LDP leader, Sanae Takaichi, dismissed suggestions that she supports a weaker yen, following a sharp drop in the currency after her election win. yen weakened about 3.6% in the week of Oct 6th. USD/JPY is now at eight-month high. Any dips in the USD/JPY are expected to be brief, with the 155 mark seen as a critical threshold that could prompt officials to step in with strong words. Still, traders are watching key technical levels, with support seen around 21-day EMA of 149.53, followed by 50-day EMA of 148.41. The focus shifts to upcoming industrial production figures, which could provide fresh impetus for the yen if economic momentum surprises to the upside or downside.
MXN Consolidation mode. The USD/MXN has seen its impressive year-to-date appreciation, driven by a robust carry trade appeal, transition into a phase of choppy, sideways consolidation, with the pair trading near the 18.30 handle. This recent price action, characterized by low volatility, is a post-event calm following the mid-September turbulence surrounding the U.S. Federal Reserve’s interest rate decision. Fundamentally, the Peso remains underpinned by interest rate differential (Mexico’s high rate vs. the U.S.’s easing cycle) and Mexico’s sound macro stability. For the short-term outlook, the USD/MXN is expected to continue this range-bound crawl. The structural support near 18.30 is crucial, and as long as it holds, and the market anticipates further U.S. rate cuts, the MXN’s favorable high-carry, high-beta nature will continue to benefit from low global volatility and stable global growth. Crucially, the key domestic risk of carry erosion has subsided as local drivers like slowing services inflation and weak economic activity point to a gradual, predictable path for Banxico rate cuts, removing the “shock” risk and ensuring the high yield differential remains a powerful magnet for capital. The main technical barrier to watch on the weekly chart is the 18.5 area, a break of which would signal a temporary dollar recovery.
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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.
