Track market-moving stories before they get noisy

Silver Price Forecast: XAG/USD remains below $61.00 following attacks on Riyadh's airport

Daily chart of AUD/USD on TradingView (2026), tracking price movement around 0.697050 following a retracement from the year-to-date peak of 0.727800. US CPI Inflation: Why a Miss Matters More Expectations heading into the US CPI data suggest both YY headline and core will rise to 3.7% (from 3.4% in August) and 2.5% (from 2.4%), respectively. MM headline is also forecast to increase to 0.6% (from 0.4%), while core is expected to ease to 0.2% (from 0.3%).

AUD/USD Price Forecast

Every new AUD/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.

See all AUD/USD forecasts The recent US payrolls printed a clear miss: 29,000 against c.90,000 expected, down from August’s initial reading of 162,000. Revisions then took 31,000 off July (now -10,000) and 29,000 off August (now 133,000), leaving the two months a combined 60,000 below previous estimates. Unemployment ticked up to 4.2% from 4.1%, though unrounded, the rate rose only from 4.14% to 4.18%, with wage growth coming in cooler. The August US PCE numbers were also recently released and came in below expectations across the board. Although the BEA changed its methodology, price pressures remain above the Fed’s 2% target.

Ultimately, for this week’s US CPI, I would expect a miss – with focus on core measures – to deliver more volatility than a beat. A miss would likely unwind October tightening bets (and perhaps take a hike off the table in December), unwind USD bullish positioning, and follow on from recent soft jobs and PCE data. A hot print largely confirms current pricing and, at most, adds a little premium for a fourth hike.

Australian Employment The only other economic data I will be watching closely this week is the Aussie employment report. Consensus suggests that the Australian economy added 20,000 new jobs, down from 39,500 in August, with unemployment expected to remain steady at 4.6%.

Following RBA Governor Michele Bullock’s comments, markets have reduced the probability of a year-end rate hike to a coin toss, and next-year expectations to just one rate hike from two. Bullock noted that the Board considered both a hike and a hold at its recent meeting and said she hoped further policy tightening would not be needed. With this, I feel a broad miss – employment down and unemployment up – would likely offer the most bang for your buck, as this could prompt investors to price out November tightening (c.7 bps) and trigger AUD downside.

Earnings: Banks Kick Off Q3 Q3 earnings season starts with Citi, Goldman Sachs, JPMorgan, Wells Fargo, Bank of America, BlackRock, and Morgan Stanley. Their commentary on credit quality, loan demand, and deposit costs will offer useful insight into consumers and businesses.

The risk is that expectations are high after a strong Q2, so even solid results or cautious guidance could disappoint. Equities are near record highs despite elevated oil, sticky inflation concerns, and multi-decade-high yields, so earnings are carrying much of the weight.

The Pound-Euro rate could stay elevated if French debt fears persist, although weak UK GDP may limit Sterling’s ability to extend recent gains. The Pound Euro (GBP/EUR) exchange rate rose to a 16-month high last week as fears of a debt crisis in France weighed heavily on the common currency.

At the time of writing, GBP/EUR was trading at €1.1814, up 0.4% on the week.

Latest — Exchange Rates:

Pound to Euro (GBP/EUR): 1.181375 (+0.13%)

Pound to Dollar (GBP/USD): 1.323299 (+0.03%)

Euro to Dollar (EUR/USD): 1.120134 (-0.10%)

DAILY RECAP:

The Euro (EUR) started the week on the back foot as rising French bond yields stoked concerns about a debt crisis in the Eurozone’s second-largest economy, which could present contagion risks to the rest of the bloc.

Political instability in Spain added to the pressure on the single currency, after Spanish Prime Minister Pedro Sánchez called a snap election.

The Euro attempted to stabilise on Tuesday as French government bonds recovered somewhat, even as German factory orders slumped a startling 10% in August.

However, the bond market turmoil continued to plague the common currency through the week, pushing the Euro down to multi-month lows against many of its rivals.

Meanwhile, the Pound (GBP) faced modest pressure at the start of last week’s session as it suffered some profit-taking following its strong performance the previous week. However, an upward revision to the latest UK services PMI cushioned GBP.

Sterling attracted fresh support on Tuesday, thanks to expectations for a Bank of England (BoE) interest rate hike next month and the possibility of closer ties between the UK and the EU.

After a subdued session on Wednesday, the Pound gained ground in the latter part of the week thanks to hawkish comments from BoE Governor Andrew Bailey.

GBP then ended the week on uncertain footing amid a lack of UK data.

Near-Term GBP/EUR Forecast: UK GDP to Stifle Sterling? Looking forward, a number of Bank of England and European Central Bank (ECB) policymakers are due to speak throughout the week, including BoE Governor Bailey and ECB President Christine Lagarde on Wednesday.

Investors will be paying close attention to the speeches in an attempt to gauge the central banks’ next steps, which in turn could impact GBP/EUR. A more hawkish stance from the BoE could underpin the Pound.

In terms of data, the key UK release will be the British GDP figures for August, due on Thursday. An expected 0.1% contraction in growth could weigh on Sterling.

For the Euro, the Eurozone’s final consumer price index for September, due on Friday, could lend the single currency support.

However, EUR investors will be keeping a close eye on French bond markets. If debt crisis fears continue to swirl, the Euro could face further pressure.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

EUR: French Debt Risk Counters ECB Tightening Expectations These forecasts were made by market participants or market analysts and reported by the source. Forecasts are not guaranteed to actually occur. Forecasts are not a reliable indicator of future performance.

France’s fiscal situation still casts a shadow on the euro. The spread on 10-year bonds between France and Germany has risen to about 137 basis points and is approaching the levels last seen in 2012. This highlights the uncertainty in the market regarding France’s ability to bring more budgetary discipline in the run up to the 2027 presidential elections.

Some help on monetary policy is expected. A Reuters poll showed that nearly 90% of economists expect the ECB to raise its 2.50% deposit rate by 25 basis points in December following a surge in euro-area inflation.

GBP: Rate-Hike Expectations Meet a Difficult Budget Test Monetary policy is expected to be tightened in the UK as well with an above 80% chance of a Bank of England rate hike in November.

EUR/USD Price Forecast

Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.

See all EUR/USD forecasts Fiscal policy is expected to be implemented to help ease the UK’s cost-of-living concerns. The IFS estimates the government will need to find about £36 billion through tax rises or welfare cuts in the upcoming Budget on the 28th of October due to higher inflation, pressure on public services and increased defence spending.

U.S. Dollar Index Technical Analysis: DXY Holds Above 102.10 as 102.49 Remains the Key Breakout Level 102.49 is the first major level of resistance, and a break above that would likely bring 102.70, and 102.95 into the picture. Again, 102.10 is a key support, and if price continues to drop, 101.75 and 101.43 would come into play.

RSI is holding about the middle line, and overall remains flat, indicating a lack of clear directional momentum. However, I do have a bullish bias, as long as price holds above 102.10 and the rising trendline. I think a break below 101.75 would bring a more bearish bias, and a clear break above 102.49 would strengthen the bias towards the 102.70-102.95 region.

GBP/USD Technical Analysis: Sterling Holds 1.3222 as 1.3284 Remains the Main Recovery Barrier

Gold finds fresh support

USD/CAD Price Forecast: US Dollar eases within range in a quiet session

USD/JPY Price Forecast: Likely find direction in this US CPI week

GBP/USD Price Forecast: Edges higher near 1.3250, but technical tone stays bearish below 100-day SMA

Swiss Franc struggles as SNB dovish stance lifts USD/CHF

EUR/USD Price Forecast: Gets some relief from Russia-Ukraine energy ceasefire

Morning briefing: The Dollar Index and Euro remains ranged while USD/JPY can rise slowly towards 159.00

USD/INR drops 1% at open as RBI steps up measures to support Indian Rupee

AUD/JPY Price Forecast: Weakens to near 110.50, maintaining negative bias under 100-day SMA

EUR/USD downside risks persist as resistance blocks recovery

Gold and silver recover ahead of US CPI, but a strong dollar and December Fed rate hike risks could limit further gains.

PBOC sets USD/CNY reference rate at 6.7313 vs. 6.7330 previous

AUD/USD snapped a four-week losing streak, but its modest rebound faces a busy week of economic data and geopolitical risks. Rising oil prices and Middle East tensions threaten risk appetite, while RBA minutes, Australian employment figures and US CPI could reshape interest rate expectations.

USD/SGD Forecast: Crédit Agricole Expects Further MAS Tightening Singapore Dollar support could strengthen as firm growth and rising inflation prompt another modest MAS policy tightening, says Crédit Agricole. Crédit Agricole expects Singapore to tighten monetary policy again on Wednesday, with technology-led growth and rising inflation supporting the case for a stronger currency despite the US Dollar's recent advance.

The Monetary Authority of Singapore's announcement is scheduled for 14 October.

Crédit Agricole's immediate currency outlook is more restrained, however, with 1.27 described as a strong near-term floor for USD/SGD while US interest-rate expectations continue to support the Dollar.

The latest official inflation release put August core inflation at 2.2%, up from 2% in July, with faster increases in services, retail goods and food prices.

Crédit Agricole strategist Eddie Cheung writes: "Singapore macro fundamentals continue to strengthen amid a global tech upcycle and foreign portfolio inflows, while the negatives from trade tensions have been less than expected."

Demand running above the economy's sustainable capacity would make it harder to absorb imported costs without broader price pressures.

Cheung writes: "At its July meeting, the MAS highlighted a projected widening of the positive output gap for 2026 as a whole-a situation we do not think has changed."

Inflation strengthens the case for another adjustment Crédit Agricole also highlights elevated oil prices as a continuing threat to imported costs.

MAS manages the Singapore Dollar against a basket of trading partners' currencies, using a faster appreciation path to restrain import prices and their spread into domestic inflation.

This is exchange-rate tightening, rather than a benchmark interest-rate rise.

Following April's tightening, MAS announced in its July policy decision: "MAS will therefore increase the rate of appreciation of the policy band very slightly."

It left the band's width and centre unchanged.

Cheung expects a similarly measured move: "Therefore, despite consecutive tightening, we think there is still scope for the MAS to tighten "very slightly" in October-the smaller increment introduced at its July meeting. Even if the MAS were to hold, we would expect a hawkish tilt."

US Dollar strength could delay Singapore Dollar gains Cheung writes: "The SGD has been a relative outperformer in Asia and is among the three regional currencies to have appreciated against the USD year-to-date, underpinned by Singapore's strong macro backdrop, foreign portfolio inflows and MAS tightening."

That assessment follows earlier ERUK coverage of the role of capital inflows and monetary policy in Singapore Dollar resilience.

Cheung estimates that the currency is already well into the upper half of the policy band: "MAS tightening should continue to keep the currency supported, with the SGD NEER currently positioned c.1.5% above the midpoint of the +/-2% policy band."

Those band parameters are the bank's estimates, rather than published MAS boundaries.

A firmer MAS stance can support Singapore's trade-weighted currency without ensuring that it rises against a strengthening US Dollar.

Cheung writes: "The greater risk for USD/SGD lies on the USD side, with the DXY rising to its highest level since Q225. We think the DXY could remain buoyed into end-2026 on the Fed rate hike dynamic before easing more substantially in 2027, leaving USD/SGD more rangebound around current levels."

Crédit Agricole's longer-term projection of USD/SGD at 1.25 by December 2027 allows for further Singapore Dollar gains as that US support fades.

The nearer 1.27 level is the bank's market assessment, not an official MAS boundary.

Cheung writes: "For now, 1.27 remains a strong floor, though we think this level could be tested as the USD weakens anew into 2027."

USD/SGD exchange rate FAQ When is the next MAS policy announcement?

The statement is scheduled for 14 October.

Does MAS tightening mean an interest-rate rise?

The expected adjustment is to the Singapore Dollar's appreciation path against a currency basket.

Is 1.27 an official USD/SGD limit?

No. It is Crédit Agricole's near-term market assessment. Its longer-term forecast is 1.25 by December 2027.

XAG/USD Forecast: UBS Recovery View Faces Yield Pressure Silver price rebound faces pressure from speculative selling and higher US real yields, Goldman Sachs warns, as UBS forecasts further gains in 2027. Silver prices rebounded on Friday, but UBS's forecast of $80 an ounce by September 2027 still depends on a substantial recovery from a market that has struggled to turn encouraging industrial indicators into sustained buying.

Spot silver closed near $60.83, up 2.2% on the day.

Robert Quinn, of Goldman Sachs FICC and Equities, writes: "Commitment of Traders encapsulating flows towards the end of September exhibited a large bearish turn in speculative positioning. Specifically, Managed Money, Other, and Non-Reportable net sold a combined $1.6bn from September 22nd - 29th, the largest weekly amount since February. Liquidation ($800mm) and new shorts ($800mm) contributed."

The estimate covers speculative positioning, rather than physical silver sales.

Half the selling closed bullish positions, while half established new bearish bets.

Image: Silver price in US dollars - three month chart Stronger industrial indicators have not overcome financial pressure Quinn's evidence for improving industrial prospects comes from equity-market indicators linked to sectors that use silver.

He writes: "Through early October, barometers for certain structural demand drivers improved. Over September 29th - October 7th, GS's Data Center and Solar equity baskets rose 4.2% and 2.4% respectively. Both maintained positive correlation with Managed Money gross long changes during the past 6 months."

These are equity-market indicators, rather than measurements of silver consumption.

During the same period, the financial conditions facing precious metals moved in the opposite direction.

Quinn writes: "However macroeconomic headwinds also proved formidable. Throughout the same time frame, US real rates edged higher and the Dollar increased (0.8%). Historically, stronger Dollar and real rate environments coincided with Managed Money gross long unwinds."

Higher inflation-adjusted yields increase the attraction of interest-bearing assets relative to silver, while a stronger Dollar raises the metal's cost for buyers using other currencies.

Quinn also identifies weakness in derivatives sentiment: "Thus in the end, the Silver price remained stuck with negative flows arguably persisting. Silver price fell 1.4%. Discretionary sentiment soured; consider normalized 25 delta put-call skew richened to the top 2 year decile. CTA selling also manifested, according to GS Futures Strategists' framework."

The options measure indicates stronger relative demand for downside protection, while Goldman's framework points to selling by systematic futures strategies.

UBS's recovery target faces an investment-demand test UBS's nearer forecast is $70 by December 2026, with further appreciation envisaged during 2027.

UBS has previously argued that higher gold prices and tighter physical conditions could support silver's recovery.

UBS said: "Silver, meanwhile, should benefit from higher gold prices and tighter near-term fundamentals."

More recent CFTC futures data for 6 October show managed-money investors still net long silver, but with that balance edging lower from the preceding week.

These futures-only figures cover a narrower group than Goldman's combined-category estimate.

Goldman sees a possible easing of one obstacle to recovery, rather than confirming that the selling has ended.

Quinn writes: "While acknowledging uncertainty over Middle East developments, note GS FX Research believes one pillar of Silver resistance, namely Dollar upside, could stall. Given stretched positioning on several pairs and recent Fed communication, the team is cautious on near-term Dollar prospects."

Silver price prediction, news FAQ What is UBS's silver forecast?

UBS forecasts $70 an ounce by December 2026 and $80 by September 2027.

Has Goldman Sachs issued an $80 silver target?

No. The $80 forecast belongs to UBS. Goldman's report analyses positioning and market pressures.

Was the $1.6bn selling a prediction?

No. Goldman estimates it occurred across the specified speculative categories during 22-29 September.

Chinese Yuan Forecast: MUFG Sees Further Gains Against Euro as PBoC Resists Dollar Strength The Chinese Yuan could extend its gains against the Euro as Beijing's currency policy limits the impact of a stronger US Dollar, according to MUFG. MUFG expects further near-term Yuan gains against the Euro as the People's Bank of China resists broader US Dollar strength, with EUR/CNY already around 10% below its January high.

Derek Halpenny, MUFG's head of research for global markets EMEA and international securities, writes: "Recent PBoC fixing in USD/CNY indicate a desire to keep CNY on a strengthening path despite the broader gains for the dollar. EUR/CNY is 10% lower from the January high and we see near-term scope for further declines."

USD/CNY ended Friday at around 6.6924.

The cross-currency effect is significant: if the Yuan holds relatively steady against the Dollar while the Euro falls, each Euro buys fewer Yuan even without a sharp decline in USD/CNY.

Image: USD/CNY chart over last 3 months The pattern extends beyond China, according to Halpenny: "The continued CNY strength is helping isolate Asian currencies from the broader dollar gain. While the DXY has advanced 3.3% from the September low, the dollar against a basket of Asia FX is just 0.7% higher."

Those measures cover different currency baskets, but the contrast helps explain why a broadly rising Dollar has not translated into uniform weakness across Asia.

Earlier ERUK coverage examined how export receipts and Beijing's tolerance of appreciation were supporting the Yuan.

Trade negotiations complicate the currency outlook The Yuan's recent strength has not settled Europe's complaints about Chinese competitiveness.

Writing before Friday's talks concluded, Halpenny said: "Trade Commissioner Maros Sefcovic is in talks with Chinese Commerce Minister Wang Wentao and coinciding with these talks is the release yesterday of a PBOC document defending the FX policy of China and arguing against the level of CNY as being the cause of China's large trade surplus."

In a press conference after the negotiations, EU trade commissioner Maroš Šefčovič outlined an understanding covering Chinese hybrid-car exports, access for European goods and export licensing for critical materials.

The package still required endorsement by EU leaders, leaving its implementation unresolved.

That progress reduces the immediate relevance of a breakdown scenario, although it does not resolve the wider dispute over China's trade surplus or establish a new exchange-rate agreement.

Halpenny writes: "Is the CNY undervalued? The answer seems certainly yes although the scale of undervaluation is debated and while this undervaluation helps boost exports the FX factor is only a partial explanation."

France's fiscal problems also weigh on the Euro in MUFG's analysis, leaving EUR/CNY exposed to developments beyond China's exchange-rate policy.

Halpenny sees energy prices as a further risk, tempered by evidence of economic resilience: "Increased concerns over a terms of trade hit from rising refined energy prices has also played a role and any further notable jumps in natural gas and diesel prices would likely hurt the economies in Europe. Still, we continue to see evidence of economic resilience in Europe that could help stabilise the euro at these lower levels."

Goldman expects Yuan gains against the American Dollar Goldman Sachs's separate forecast points to USD/CNY at 6.40 over the next 12 months, equivalent to roughly 4.6% Yuan appreciation from Friday's close.

Goldman's economic outlook also distinguishes export strength from conditions at home: "In China, we expect real GDP growth of 4.5% yoy in 2026, reflecting broad-based export strength but headwinds from weak domestic demand."

Chinese Yuan forecast: quick questions Will the Yuan strengthen against the Euro?

MUFG sees further near-term falls in EUR/CNY, which would mean a stronger Yuan against the Euro.

What is Goldman Sachs's USD/CNY forecast?

Goldman targets 6.40 over the next 12 months, implying roughly 4.6% Yuan appreciation from Friday's close.

Why do PBoC fixings matter?

They signal Beijing's preferred direction for the currency and influence how strongly broader Dollar moves feed into the Yuan.

New Zealand Outlook: Crédit Agricole Targets $0.63 as Inflation Tests RBNZ The NZ Dollar could be set to recover against the US Dollar in the near-term as inflation prompts faster rate rises and farm exports provide support. Crédit Agricole expects inflation to force the Reserve Bank of New Zealand into faster interest-rate increases,.

2026 Australian Dollar Forecast: Crédit Agricole Sees $0.73 After Near-Term Setback FX analysts expect the Aussie Dollar to recover against the US Dollar, but softer rate expectations and bond-market strains delay its rebound. Crédit Agricole forecasts another setback for the Australian Dollar before a recovery to US$0.73 by December 2027, with fading expectations for further domestic rate rises leaving the currency exposed to global bond-market volatility.

AUD/USD ended Friday near 0.6984, recovering a little ground after September's 3.15% decline.

Latest — Exchange Rates:

Australian Dollar to Dollar (AUD/USD): 0.698362 (+0.35%)

Pound to Australian Dollar (GBP/AUD): 1.894861 (-0.32%)

Euro to Australian Dollar (EUR/AUD): 1.603945 (-0.45%)

The bank's 9 October projections put the pair at 0.69 in December 2026 and 0.70 in June 2027, placing most of the subsequent recovery in the second half of next year.

The immediate question is whether the coming week's Reserve Bank of Australia minutes and employment figures can restore some confidence in the domestic interest-rate outlook.

Image: AUD/USD chart showing performance for last week Markets question how much more tightening is coming Crédit Agricole's senior FX strategist David Forrester links the weaker rate outlook to deteriorating household sentiment.

"A steep drop in Australian consumer confidence led to the Australian rates market reducing the chances of follow-up rate hikes by the RBA."

The deterioration followed September's increase, as our coverage of the Australian confidence slump explained, with consumers questioned after the decision particularly downbeat.

Forrester says: "While the market is still fully pricing in another 25bp rate hike by the middle of 2027, it has pulled back from pricing in a good chance of more than one rate hike."

The issue is therefore the extent of further tightening, rather than a wholesale switch towards expectations of rate cuts.

Investors considering Australian assets compare their prospective returns with those available elsewhere, so a reduced Australian rate path can weaken the currency even when another increase remains expected.

Meanwhile, holding a higher-yielding currency becomes less appealing when exchange-rate losses threaten to outweigh the extra interest earned.

Forrester writes: "Investors also remain rattled by the global bond sell-off reducing demand for the AUD as a carry trade."

Minutes and jobs data could challenge that caution The RBA will publish its September meeting minutes on 13 October, offering more detail on the policy debate behind the latest increase.

Crédit Agricole expects the account to sound firmer than Governor Michele Bullock's press conference.

"While the policy statement was hawkish following the RBA's September rate hike, Governor Michele Bullock sounded less hawkish in her press conference. We note that Bullock tends to present her own view at the press conference and so expect the Minutes to likely be hawkish."

The September labour-market report follows on 15 October, potentially providing a contrast with weakening business sentiment.

Forrester writes: "Business confidence will probably weaken on the back of higher energy prices as well as the market fully pricing in an RBA rate hike at the September meeting. Australian employment demand likely remained firm in September."

Forrester cautions against judging the report solely by its headline unemployment rate.

"While investors will focus on the unemployment rate, which at 4.6% sits 10bp above the RBA's forecast average for H226, we think they should also look at other indicators of labour market slack such as the underemployment, hours based underutilisation and youth unemployment rates to gauge how the RBA will react to the data."

Those measures can show whether spare capacity is increasing beyond what the headline unemployment rate reveals.

Domestic strengths need a calmer global market The longer-term recovery case rests on support that remains present despite the reduction in near-term rate expectations.

Crédit Agricole says: "The AUD is clinging to its rate advantage as sticky inflation forces the RBA to continue raising rates even while other central banks join the tightening cycle, making the currency a favoured carry trade."

It also points to advantages beyond monetary policy: "Adding to the AUD's appeal are elevated commodity prices and low levels of public debt, the latter leaving it immune to concerns about fiscal sustainability."

Australia's comparatively strong public finances can reduce its exposure to the sovereign-debt concerns troubling other markets, although they cannot prevent a general retreat from risk-sensitive currencies.

Forrester expects overseas releases to be influential in the week ahead: "China trade as well as US retail sales and inflation data will be the big international drivers of the Antipodean currencies in the coming week. With UST yields being such a strong driver of investor sentiment, the US data is likely to take centre stage."

AUD/USD Exchange Rate FAQ What is Crédit Agricole's Australian Dollar forecast?

It projects AUD/USD at 0.69 in December 2026, 0.70 in June 2027 and 0.73 in December 2027.

Why could the Aussie weaken before recovering?

Reduced expectations for further RBA hikes and unsettled bond markets are limiting demand for the currency.

Which Australian releases matter next?

The RBA's September meeting minutes arrive on 13 October, followed by September employment figures on 15 October.

Analysts expect the Yen to strengthen against the US Dollar, but Japanese investors' continued overseas buying challenges the pace of recovery. Japanese investors are still buying foreign assets heavily, testing Goldman Sachs' expectation that a shift in domestic policy will help the Yen recover against the US Dollar over the next year.

Goldman's latest forecasts put USD/JPY at 158 in three months, around January 2027, and 150 in 12 months, around October 2027.

The pair ended Friday near 158.33, leaving its near-term projection close to the market while the longer forecast requires a meaningful Yen appreciation.

Latest — Exchange Rates:

Dollar to Yen (USD/JPY): 158.32755 (+0.17%)

Euro to Dollar (EUR/USD): 1.120134 (-0.10%)

Pound to Dollar (GBP/USD): 1.323299 (+0.03%)

An 8 October study of Japanese portfolio flows shows why that recovery may take time: investors with unhedged overseas holdings have yet to change direction decisively, even as banks sell foreign bonds.

Goldman's Karen Reichgott Fishman and colleagues say: "We recently turned structurally bullish Yen as the domestic policies that have weighed on the currency for much of the past 10-15 years appear to be shifting in a more supportive direction. The BoJ has seemingly shifted to a faster pace of hikes and, most importantly, there appears to be a focus within the government on encouraging some reallocation by domestic investors back towards domestic assets."

The latest evidence tests the shift behind Goldman's September reduction in its 12-month Dollar-Yen forecast from 165 to 150.

Higher Japanese rates can improve the return available at home, but a stronger domestic investment proposition still has to persuade savers to change what they buy.

Overseas equity buying remains strong The Goldman analysts say: "We have been of the view that any shift in flows would likely be a slower-moving process, and so far that looks true among mostly unhedged investors."

Their reading of the Finance Ministry's September securities transactions release shows investment trusts, including retail investors and NISA savings-account flows, buying a net $8.7 billion of foreign equities, slightly more than in August.

NISA is Japan's tax-advantaged investment-account system.

MUFG's 9 October assessment reinforces that concern over a longer window.

Derek Halpenny, MUFG's head of research for global markets EMEA and international securities, says: "The buying has picked up and the 3mth sum of foreign equity purchases totalled JPY 3,949bn, a new record over a 3mth period."

Halpenny adds: "This Investment Trust flow captures households buying of foreign securities via NISA accounts and it remains clear that the expanded NISA limits adopted in January 2024 continues to have a notable impact."

Purchases of overseas investments without currency hedges create exposure to foreign currencies, potentially sustaining demand for them even as Japan's interest rates rise.

There is some moderation elsewhere, but slower buying is still different from bringing money home.

Goldman says: "The trust accounts category, which includes the public pension fund, suggests that net purchases of foreign bonds continued in September, but at a slower pace than in August ($7.6bn vs $14.7bn in August) and below the average pace of the prior six months ($8.6bn)."

"More broadly, our preferred estimate of key unhedged investor flows suggests that demand for foreign assets has generally persisted at a similar pace over the past year and shows no obvious signs of rotation. If that were to change, however, these data would be the first place to see it."

Bond sales do not tell the whole currency story Japanese banks' foreign-bond sales accelerated to $15.9 billion in September, according to Goldman, while life insurers also remained net sellers.

Those sales could look like evidence supporting Goldman's recovery forecast, but currency hedges change their significance.

Goldman says: "While less relevant for the Yen, repatriation flows have been evident in the data for typically hedged investors (mainly banks and roughly 40% of flows by Lifers)."

A currency hedge already offsets some or all of an overseas holding's exchange-rate exposure, so selling the asset and unwinding that protection need not generate equivalent fresh demand for Yen.

The question is whether domestic policy can alter the choices of investors who have bought abroad without protection.

MUFG points to discussions about allowing Japanese government bonds within NISA accounts, following Finance Minister Satsuki Katayama's July suggestion that their inclusion should be considered.

That remains a potential policy change, rather than an implemented incentive already redirecting savings.

Halpenny says: "Providing tax-free opportunities to hold JGBs could well have an impact on the flows to foreign equity markets that is so evident today and given the scale of foreign equity purchases currently would be viewed as a clear yen positive."

The Euro could recover against the US Dollar as bearish bets unwind, but Rabobank expects French fiscal risks to limit the rebound's staying power. Rabobank expects a Euro recovery towards 1.13 against the US Dollar in the coming weeks, as calmer French bond markets give investors an opportunity to close bearish currency positions.

EUR/USD ended Friday near 1.1201, leaving it around 1.1% lower since the start of October despite recovering from the week's lows.

Latest-Exchange Rates:

Euro to Dollar (EUR/USD): 1.120134 (-0.10%)

Pound to Dollar (GBP/USD): 1.323299 (+0.03%)

Dollar to Yen (USD/JPY): 158.32755 (+0.17%)

The bank keeps its longer-term expectations subdued: "That said, we do not expect the currency pair to be able to push significantly higher medium-term. Our 12-month forecast is EUR/USD1.12."

Buying Euros to close bets against the currency could lift it temporarily, without requiring investors to become more confident about the region's finances or economic prospects.

Image: EUR/USD chart for last week (Exchange Rates UK Data Hub) French bond selling becomes a currency problem In our 1 October coverage of Rabobank's Euro outlook, the bank argued that investors selling French bonds had largely remained in Euro-denominated debt, limiting the damage to the currency.

Its latest assessment puts greater weight on the risk of that money leaving the Eurozone.

Rabobank says: "By the end of last week, concerns were rising as to the risks of contagion to other highly indebted countries in the Eurozone. This was likely a crucial element in igniting pressure on the EUR."

"Previously, it appeared that sellers of OATs were rolling into other EUR denominated assets, possibly Italian, Spanish or German government debt. The question of contagion appeared to incentivise sellers of OATs to question exposure to the Eurozone and to the EUR."

OATs are French government bonds, while German Bunds provide the benchmark against which their borrowing costs are commonly compared.

Moving between those markets need not involve selling Euros, whereas moving money into Dollar assets can create demand for the US currency.

Rabobank cites Banque de France figures showing foreign investors held 57.84% of OATs in the second quarter, giving overseas investment decisions considerable importance for French financing.

Budget credibility complicates an ECB rescue The bank sees little prospect of immediate European Central Bank intervention resolving France's difficulties, arguing that support without a convincing budget could damage the ECB's credibility.

The ECB's Transmission Protection Instrument criteria include fiscal sustainability and compliance with the EU's fiscal framework, with activation subject to the Governing Council's assessment.

The programme addresses disorderly financing conditions that are not warranted by a country's economic fundamentals.

Rabobank highlights the political obstacles: "The French government has announced a budget proposal that includes tax hikes and spending cuts which will be debated in parliament over the coming weeks. Mass protests against education provision, however, demonstrate how difficult an austerity budget will be."

The bank says: "While opposition parties may allow a budget to pass, this may be only so that they can change it after next spring's Presidential election."

Rabobank points to another possible route for intervention: "In any case, it is widely considered more likely that any initial intervention by the ECB to stabilise markets would likely take the form of a pausing of QT."

Quantitative tightening reduces central-bank bond holdings as securities mature without the proceeds being reinvested, as the ECB's asset-purchase programme guidance explains.

Pausing that process could ease pressure on bond markets, although it would leave the French government responsible for securing a credible budget.

Dollar confidence limits the Euro's recovery The Euro has also lost support from investors who previously expected German fiscal expansion to improve its prospects.

Rabobank says: "In 2025, the market ratcheted up long EUR positions at the start of the year on the back of optimism regarding the loosening of Germany's debt brake. These long positions were held up to the start of the Iran War when they quickly evaporated."

Rabobank says: "Factors such as the region's energy importer status, concerns about a hybrid Russian war and political worries concerning the growth of the far-right in both Germany and France are likely undermining the single currency."

The bank reports bargain hunting in French bonds as yields retreated from their weekly peaks.

"At the same time, confidence in the outlook for the greenback is far stronger than a year ago. Just as interest in the EUR likely facilitated USD selling last year, the more positive outlook for the greenback is likely encouraging investors to stay short of the EUR."

Rabobank also sees an imbalance in how investors are treating fiscal risks: "At the same time, the robust growth backdrop in the US has favoured the USD and distracted attention away from the US's also very significant budget deficit."

US CPI and PPI headline a packed inflation calendar
Markets price three-plus Fed hikes despite recent disinflation
Short-term correlations suggest risk appetite is driving USD/JPY
Narrowing trading range leaves USD/JPY awaiting a catalyst
US inflation data dominates the week ahead for USD/JPY, with Wednesday's CPI and Thursday's PPI reports likely to influence Treasury yields and broader risk appetite.

With markets pricing more than three Fed rate hikes by the middle of next year, the onus remains on inflation to stay relatively elevated and sticky to justify those expectations.

However, the recent deterioration in USD/JPY's traditionally strong relationship with US Treasury yields suggests the reaction in riskier assets may be just as important as movements in yields themselves, complicating the outlook for the pair.

US inflation takes centre stage

Source: TradingView

Outside Wednesday's CPI report, Thursday shapes up as another big session for US economic data, with PPI and retail sales released alongside each other. Following strong increases across retail sales measures in August, another solid outcome would reinforce the view that consumer demand remains firm enough to support further Fed tightening.

Friday's import prices will also be worth monitoring for signs of inflation pressures, particularly given elevated energy costs.

There's plenty of Fed speak throughout the week, although remarks after the inflation reports are likely to carry more weight. Governor Christopher Waller will discuss artificial intelligence at the Bloomberg New Economy Forum in New Delhi on Tuesday, while Fed Chair Kevin Warsh will participate in a fireside chat with IMF Managing Director Kristalina Georgieva in Bangkok on Thursday.

While Warsh may face questions about the policy outlook following CPI, he's shown little inclination to provide explicit forward guidance, and that's unlikely to change when discussing the global economy at a forum outside the United States.

In Japan, the calendar is as quiet as a church mouse. Remarks from BOJ board member Junko Koeda provide an opportunity to influence market pricing, which, like the Fed, favours a December move over October. Unless she delivers something truly unexpected, her appearance may come and go with little fanfare.

Core CPI cools, PPI remains hot
Heading into the September CPI report, the brutal truth is that inflation has remained above the Fed's 2% target for more than five years.

While there have been encouraging signs of near-term disinflation, with core CPI running at an annualised pace of just 1.97% over the past three months, the six-month annualised rate of 2.57% and year-on-year rate of 2.45% show that price pressures remain elevated.

Source: LSEG

For September, headline CPI is expected to rise 0.6%, with core inflation forecast to increase by just 0.2%, down from 0.3% in August.

Core PPI inflation has been running considerably hotter than core CPI, with the three-month annualised rate at 3.36%, the six-month rate at 3.73% and the annual rate at 4.62%.

However, historical analysis dating back to 2010 suggests that while producer inflation has traditionally provided some indication of where consumer inflation may be heading, that relationship has weakened considerably since 2023. More recent predictive testing also suggests PPI has generally made short-term CPI forecasts less accurate, rather than improving them.

While PCE remains the Fed's preferred inflation measure, historically it's been CPI that's generated the larger market reaction in Treasury yields and USD/JPY. That makes Wednesday's report the main event risk, with Thursday's PPI likely to play a secondary role, even though components feed directly into the core PCE deflator.

Three hikes priced, plenty at stake
As covered extensively beforehand, there's been an abrupt shift in the Fed interest rate outlook over the past six months, with markets moving from pricing several cuts to more than 80 basis points of tightening by the end of next year.

While there's little expectation of a follow up hike in October following September's increase, markets favour a further 25 basis point move before year-end, followed by at least two, perhaps three, more by the end of 2027.

Source: TradingView

Given how little tightening is priced for October, it would likely take a core CPI reading well north of 0.3% to get markets seriously considering a hike. Otherwise, recent Fed commentary suggests October is being positioned as a placeholder, with December the more likely live meeting when fresh forecasts and dot plot will be issued.

Alternatively, an undershoot in core CPI could pull the rug from underneath hawkish pricing, especially given the softness in payrolls a fortnight ago, potentially dragging Treasury yields lower, particularly at the front end and belly of the curve.

Risk appetite may matter more than yields
While the inflation reports will be influential for Fed pricing, particularly at the front end of the Treasury curve, the more important factor for USD/JPY this week may be how riskier assets digest those releases.

That's because the traditionally strong, positive relationship between USD/JPY, US Treasury yields and US–Japan yield spreads has been inconsistent recently. Over the past five sessions, USD/JPY has shown a correlation of -0.93 with VIX futures and +0.79 with S&P 500 futures, compared with just +0.47 for US two-year Treasury yields and +0.48 for equivalent yield spreads.

Source: LSEG

Over the past fortnight, correlations with US two-year yields and equivalent yield spreads have turned negative at -0.43 and -0.39, respectively, possibly reflecting the influence of quarter-end capital flows.

However, the strong relationships with VIX and S&P 500 futures are largely absent over longer windows, putting a big asterisk next to the recent readings. Five sessions is nowhere near long enough to declare a regime change, especially given the historical influence of interest rate differentials and carry trades.

While risk appetite has played a greater role recently, I suspect rate differentials will reassert themselves as a more influential driver of USD/JPY, particularly if this week's inflation reports trigger a meaningful shift in the Fed rate outlook.

USD/JPY playing pong between moving averages

Source: TradingView

For all the discussion about USD/JPY's changing relationships with yields and risk appetite, the pair has barely moved in October, trading in a range of roughly 150 pips. It feels like the market is waiting for a catalyst.

The broader range between 156.40 and 159.00 has been narrowing, with dips towards 157.50 bought last week, while offers continue to cap moves above 158.45.

As the daily chart inset shows, the latter sits just below the 200-day moving average at 158.54, while the 50-day moving average at 157.70 helps explain the dip buying. For now, USD/JPY is effectively playing pong between these moving averages.

Momentum indicators are providing no strong tell when it comes to directional bias. RSI (14) is marginally above the neutral 50 level but flatlining, while MACD has just crossed above its signal line in positive territory, although there's little velocity behind the move. Both are effectively meandering.

On the upside, 158.45 and the 200-day moving average at 158.54 are the initial levels to watch, followed by 159.00 and 159.50, where horizontal resistance converges with the 100-day moving average. The latter has acted as both support and resistance previously, strengthening its significance.

On the downside, 157.50 is the first level to watch following last week's dip buying, followed by 157.00 and 156.40, which has acted as both support and resistance recently. Below that, a more substantial support zone runs from 155.50 down to 155.00.

The threat of intervention remains a consideration on any sustained push higher. At the same time, the US economy continues to look a better bet than most, deterring prolonged dollar weakness.

For now, it's a stalemate. Perhaps this week's inflation reports will finally shake things up.