The Fed is widely expected to cut interest rates by 25 basis points (with some analysts suggesting a deeper 50 bp cut), while the ECB will likely keep policy unchanged. The eurozone’s key refinancing rate is already close to the target level of 2.00%, and inflation risks remain under control.
On Friday, the euro area will release October inflation data: forecasts suggest that Germany’s annual CPI will slow from 2.4% to 2.2%, while the monthly figure is expected to remain at 0.2%. Across the eurozone, inflation is projected to ease from 2.2% to 2.1%, and core inflation—from 2.4% to 2.3%.
Similar trends are observed in the U.S. CPI report, which continues to show easing inflation pressures. In September, the annual consumer price index rose from 2.9% to 3.0%, slightly below the 3.1% forecast, while the monthly reading slowed from 0.4% to 0.3%. Core CPI, excluding food and energy, declined from 3.1% to 3.0% y/y and from 0.3% to 0.2% m/m. Additional support for the euro came from Germany’s IFO business sentiment data released Monday: the business climate index increased from 87.7 to 88.4 (forecast: 87.8), while the expectations index rose from 89.8 to 91.6. Improved business confidence is linked to the ECB’s monetary easing and investor optimism regarding the EU’s and Germany’s plans to modernize infrastructure and boost defense spending.
GBP/USD
The British pound is gaining strength, extending a modest bullish impulse formed earlier. The pair is testing 1.3360 for a breakout as traders await fresh catalysts. Market participants are focused on tomorrow’s Fed meeting at 20:00 (GMT+2). According to the CME FedWatch Tool, there is nearly a 90% probability of a 25 bp rate cut.
In recent days, analysts have increasingly suggested that the Fed could pursue more aggressive monetary easing—potentially in December. This outlook is supported by Friday’s U.S. inflation data: annual CPI accelerated slightly from 2.9% to 3.0% (vs. 3.1% expected), while core inflation slowed from 3.1% to 3.0%. Inflationary pressure has been one of the main barriers for Fed Chair Jerome Powell in lowering rates further, forcing the central bank to adopt a cautious stance despite political pressure from the White House. The labor market data remains unavailable due to the ongoing government shutdown.
Meanwhile, the pound was moderately supported by strong U.K. retail data released last week. Retail sales rose 1.5% y/y in September versus 0.7% previously (forecast: 0.6%). On a monthly basis, growth slowed slightly from 0.6% to 0.5%, still exceeding expectations of a –0.2% decline.
NZD/USD
The New Zealand dollar is trading higher near 0.5780, close to its October 9 peak, maintaining a cautious short-term uptrend. Market attention remains on tomorrow’s Fed meeting, where a 25 bp rate cut is widely anticipated. This move is largely priced in, but traders are waiting for Jerome Powell’s tone, which could trigger short-term volatility in the U.S. dollar. Another cut is expected in December, as inflation data came in weaker than forecasts: annual CPI rose from 2.9% to 3.0% (vs. 3.1%), while monthly CPI eased from 0.4% to 0.3%. Core inflation also slowed from 3.1% to 3.0% and from 0.3% to 0.2%, respectively.
The Fed is likely to remain cautious, as the U.S. government shutdown continues to disrupt labor market data releases. Meanwhile, the Reserve Bank of New Zealand (RBNZ) cut its rate by 50 basis points to 2.50% at its October meeting, exceeding market expectations of a 25 bp reduction. The central bank cited persistent inflationary risks, with prices remaining near the upper limit of the 1.0–3.0% target range. Officials expect inflation to gradually ease to around 2.0% by mid-2026. However, New Zealand’s economic activity remains subdued due to global trade uncertainty, driven by U.S. tariff policies and tensions in U.S.-China relations. Later this week, Presidents Donald Trump and Xi Jinping are expected to meet at the APEC Summit to discuss trade resolution. U.S. Treasury Secretary Scott Bessent earlier confirmed preliminary agreements, including China’s decision to delay export restrictions on rare earth metals and the White House’s suspension of new import tariffs set for November 1.
USD/JPY
The U.S. dollar is declining against the Japanese yen, extending a weak bearish trend and testing 151.90 on the downside. Traders await Wednesday’s Fed decision, which is expected to include a 25 bp rate cut to 4.00% and dovish guidance from Jerome Powell, given lower-than-expected inflation data. CPI rose from 2.9% to 3.0% (vs. 3.1%), while the monthly rate slowed from 0.4% to 0.3%. Core CPI declined from 3.1% to 3.0% and from 0.3% to 0.2%, respectively.
Inflation concerns have long constrained the Fed’s ability to lower rates, prompting policymakers to adopt a patient stance despite political pressure. The Bank of Japan meets Thursday and is expected to leave monetary settings unchanged but may hint at future tightening. The key question is the approach of new Prime Minister Sanae Takaichi, known for her dovish stance and opposition to further rate hikes.
XAU/USD
Gold is falling, extending a short-term downtrend and testing 3950.00 as safe-haven demand weakens amid optimism surrounding U.S.-China trade talks. U.S. Treasury Secretary Scott Bessent told CBS News that President Donald Trump’s plan to impose 100% tariffs on Chinese imports is “essentially off the table” after Beijing agreed to revise soybean trade policies and delay export restrictions on rare earth metals.
Meanwhile, the U.S. dollar remains under pressure due to the ongoing government shutdown, which dampens growth outlooks. However, gold demand is supported by the upcoming Bank of Canada and Fed meetings on Wednesday, expected to result in further monetary easing. Last week’s U.S. inflation report strengthened expectations of imminent rate cuts, with CPI rising from 2.9% to 3.0% (vs. 3.1%) and core inflation easing to 3.0% and 0.2% monthly.