Forex Market Outlook: USD Strengthens, Oil Rises on U.S.–India Trade Progress

Investors and forex traders are focused on trade relations between the United States and India: recently, the White House increased import tariffs on goods from India in an attempt to pressure New Delhi into fully abandoning purchases of Russian oil. According to CNBC, both sides made some progress during negotiations yesterday: India agreed to reduce imports of Russian crude, while the U.S. administration will lower tariffs from 50.0% to 15.0–16.0%. In addition, Washington is considering increasing the annual import quota for non-GMO corn to India, currently capped at 0.5 million tons, and creating a mechanism that will allow both parties to review tariffs and market access over time. Meanwhile, investors are also concerned about the uncertainty surrounding the planned meeting between U.S. President Donald Trump and Russian President Vladimir Putin, announced last week. Trump stated yesterday that he sees no reason to hold the meeting, which reduces hopes for a near-term resolution of the Russia–Ukraine conflict.

Eurozone

The euro is weakening against the U.S. dollar and the yen but strengthening versus the pound.

According to a Reuters survey of leading economists, most believe that the European Central Bank (ECB) has completed its “dovish” policy cycle this year, as inflation remains close to the 2.0% target and the economy stays stable. About 57.0% of experts expect the ECB to keep monetary policy unchanged next year since the average consumer price index is projected to remain steady through 2027. The eurozone’s gross domestic product (GDP) is expected to grow by 1.2% this year, 1.1% in 2026, and 1.4% in 2027. Moreover, ECB President Christine Lagarde supported German Chancellor Friedrich Merz’s call to establish a unified European stock exchange aimed at boosting the bloc’s economic recovery.

United Kingdom

The British pound is weakening against the U.S. dollar, the euro, and the yen.

Investors are analyzing September’s macroeconomic data: the consumer price index fell from 0.3% to 0.0% month-over-month and remained at 3.8% year-over-year, missing expectations of a rise to 4.0%. The core CPI dropped from 0.3% to 0.0% month-over-month and from 3.8% to 3.5% year-over-year, compared to forecasts of 3.7%. With inflationary pressure stabilizing, Bank of England officials may adopt a more dovish stance, increasing the likelihood of an interest rate cut in December from 46.0% to 75.0%.

Japan

The Japanese yen is strengthening against the euro and the pound but shows mixed dynamics in its pair with the U.S. dollar.

Investors and forex traders are watching Japan’s September foreign trade data, which fell short of market expectations: exports rose 4.2% versus forecasts of 4.6%, while imports grew 3.3% versus the expected 0.6%, keeping the trade balance deficit at 234.6 billion yen. However, the fact that exports posted positive growth for the first time in five months gives investors hope for stabilization in the industrial sector, which has been under pressure from U.S. tariffs. Exports to the U.S. dropped 13.3% year-over-year in September, declining for the sixth consecutive month, with car exports down 24.2% and chip manufacturing equipment down 45.7%. On the other hand, China increased its purchases of Japanese goods by 5.8%, mainly in transport and raw materials, while other Asian countries boosted imports by 9.2%. Overall, this data increases the likelihood of monetary tightening by the Bank of Japan.

Australia

The Australian dollar is strengthening against the euro and the pound but shows mixed movement against the yen and the U.S. dollar.

Next week, investors are awaiting the release of third-quarter inflation data, which could significantly influence the Reserve Bank of Australia’s (RBA) monetary policy. Preliminary estimates suggest the consumer price index will rise from 0.7% to 1.0% quarter-over-quarter and from 2.1% to 2.9% year-over-year, reaching the upper boundary of the RBA’s target range. This outcome would support the continuation of the current monetary stance and provide short-term strength to the national currency.

Oil

Oil prices resumed growth amid reports of an imminent U.S.–India trade deal, under which India will reduce most of its imports of Russian crude, thereby increasing demand for alternative grades of oil.

Additionally, positive momentum is supported by uncertainty over the potential Trump–Putin meeting, which raises the likelihood of ongoing sanctions on Russia’s energy sector. Meanwhile, according to yesterday’s report from the American Petroleum Institute (API), U.S. crude inventories fell by 2.980 million barrels. Following the data, the U.S. Department of Energy announced plans to purchase 1.0 million barrels of crude oil to replenish strategic reserves while prices remain low.