The US federal government shut down on October 1 after members of Congress failed to reach a consensus on the 2026 budget, and the stopgap funding bill passed by the House through the end of November also failed to get through the Senate: Democrats are pushing for stronger social programs, while Republicans aim to cut healthcare and insurance spending and prioritize defense. The current shutdown is the second longest on record; this week President Donald Trump plans to visit South Korea, which could significantly hinder dialogue between lawmakers. Meanwhile, on Tuesday the President met with Republican senators and, according to some reports, they agreed not to make concessions to the Democratic minority.
In the euro area, consumer confidence data will be released today at 16:00 (GMT+2), though it is unlikely to meaningfully affect the single currency: in any case, the indicator is expected to edge down from –14.9 to –15.0 in October. On Friday at 10:00 (GMT+2), S&P Global and Hamburg Commercial Bank (HCOB) will publish PMI data: forecasts suggest the manufacturing index will dip from 49.8 to 49.5 in October, and services from 51.3 to 51.1, which could weigh on the euro as investors anticipate further deterioration in the region’s economic backdrop—partly due to uncertain US–China trade policy amid escalating tensions. In response to China’s export restrictions on rare earths, the EU also announced countermeasures. The European Commission is due to finalize the list by month-end, but there are concerns the bloc’s economy may struggle to absorb such rapid shifts in global market conditions, especially alongside the reallocation of energy supplies.
GBP/USD
Sterling is weakening against the US dollar, again testing 1.3350 for a downside break: the pair fell quite firmly yesterday, though it recovered most losses by the close. Wednesday’s UK inflation figures pressured the pound, reinforcing the likelihood that the Bank of England will ease policy this year: core CPI slowed to 3.5% y/y in September from 3.6% (3.7% expected), while headline held at 3.8% vs. 4.0% expected, and the monthly print fell to 0.0% from 0.3%.
Traders also focused on the Retail Price Index: y/y it eased to 4.5% from 4.6%, and m/m to –0.4% from 0.4% (vs. 4.7% and –0.1% expected). Markets now price a 75.0% chance of a 25 bps BoE rate cut by year-end, though November looks unlikely given limited time to confirm a broader downshift in price pressures. Early Friday at 01:01 (GMT+2), GfK consumer confidence for October is due and is seen slipping from –19 to –20.
Also Friday at 08:00 (GMT+2), September retail sales arrive: y/y growth is expected to slow from 0.7% to 0.6%, and m/m from 0.5% to –0.2%. Finally, at 10:30 (GMT+2), PMIs are due: S&P Global manufacturing is seen improving from 46.2 to 46.6 in October, and services from 50.8 to 51.0. Meanwhile, the US dollar remains under mild pressure on expectations for a Fed rate cut at the October meeting, with odds rising for a faster adjustment and another cut in December. The three-week US shutdown remains in focus; hopes for a bipartisan deal this week are fading as President Trump prepares for an Asia trip.
AUD/USD
The Australian dollar is mixed against the US dollar, consolidating near 0.6480: investors and forex traders are reluctant to open new positions amid a light data calendar. The US shutdown continues to delay key macro prints. Yesterday it emerged that the Senate rejected a funding bill for the twelfth time, though 54 lawmakers voted in favor this round—four more than previously. Despite both sides’ reluctance to compromise, the economic drag continues to build, pressuring the Democratic party politically.
In Australia, October PMIs from S&P Global are due Friday at 00:00 (GMT+2): last month, manufacturing fell from 53.0 to 51.4, while services eased from 55.1 to 52.4. Traders are also watching the upcoming Trump–Xi meeting in Seoul, where the sides may discuss rising trade tensions. Recall the White House previously flagged 150.0% tariffs on Chinese goods from November 1 in response to Beijing’s revised export policy on rare earths.
USD/JPY
The US dollar is gaining versus the Japanese yen, extending a solid short-term uptrend as both economies face uncertainty. The US shutdown remains a focal point, now the second longest on record. Yesterday, the Senate rejected a temporary funding bill for the twelfth consecutive time, though the number of “yes” votes is gradually increasing.
This raises hopes for a compromise before November, although subsequent budget debates also look set to be contentious. Another headwind for the dollar is the possibility of a Fed rate cut as soon as the October meeting. Meanwhile, the yen faces pressure after Sanae Takaichi, leader of the Liberal Democratic Party, was elected Japan’s new Prime Minister. Known for conservative views, she opposes further monetary tightening by the Bank of Japan and advocates revising the Constitution, which effectively prohibits a full-fledged army.
XAU/USD
The XAU/USD pair is consolidating near 4110.00, set to finish the week modestly lower: on Tuesday, gold fell nearly 6.0% on technical factors and widespread profit-taking. Fundamentally little has changed. The US dollar has gained a modest bid, but expectations of Fed easing are limiting a sustained bullish move for the greenback. Traders are also closely watching the planned Trump–Xi meeting at the APEC summit in South Korea (October 31–November 1). In any case, the White House’s aggressive tariff policy remains one of its main foreign-policy levers. Notably, the US announced new Russia sanctions focused for now on the oil sector, and President Trump urged the EU, Canada, and Australia to step up sanctions as well, arguing this is needed to end the Russia–Ukraine conflict.