Earlier this week, French Prime Minister Sébastien Lecornu announced his resignation, having served less than a month in office after presenting the new Cabinet. Both far-left and far-right parties in the French parliament immediately called for the dissolution of parliament and early elections. However, President Emmanuel Macron is unlikely to agree to that, as there is a high risk that Marine Le Pen’s National Rally party could win a parliamentary majority. The only viable option for Macron seems to be appointing a loyal prime minister, though forming a stable coalition in a fragmented parliament remains highly uncertain. Macron has repeatedly stated he will not resign before the 2027 elections, making that scenario improbable. Another negative factor for the euro was Germany’s industrial orders data for August, which showed a 0.8% decline versus a 1.4% expected increase, although the annual figure rose 1.5% after falling 3.3% the previous month. In the U.S., few macroeconomic releases are available, as the federal government remains shut down due to Congress failing to approve a new budget. Investors, however, noted a drop in the Economic Optimism Index by IBD/TIPP from 48.7 to 48.3 points (forecast: 49.3), while consumer credit growth slowed sharply from $16.01 billion to $0.36 billion, well below expectations of $13.5 billion.
GBP/USD
The pound is weakening in the GBP/USD pair during the morning session, again testing the 1.3390 level downward and extending the previous day’s bearish move. Investors are focused on the Financial Policy Committee report and the Bank of England’s September meeting minutes, where policymakers kept rates unchanged but warned of persistent inflation risks. Meanwhile, the UK economy is slowing sharply, and new import tariffs from the U.S. and EU add further uncertainty. The Bank of England expects inflation to peak near 4.0% before easing, opening the door for renewed monetary stimulus. By contrast, the U.S. Federal Reserve is expected to cut interest rates in October — CME Group’s FedWatch Tool puts the probability at 95.0%, while a December rate cut is seen as 84.0% likely.
Markets are also monitoring the ongoing U.S. government shutdown, which began on October 1. The Senate has already rejected a temporary funding bill five times this week, though hopes for progress remain. UK macro data published yesterday showed Halifax house price growth slowed from 2.2% to 1.3% year-on-year and from 0.3% to –0.3% month-on-month. This cooling in housing could help lower inflation and may encourage the Bank of England to ease policy more aggressively.
NZD/USD
The New Zealand dollar is falling in the NZD/USD pair during the Asian session, updating its lowest levels since April 11. The pair is testing the 0.5740 level downward under pressure from the Reserve Bank of New Zealand’s surprise 50-basis-point rate cut to 2.50% (expected: –25 bps). The RBNZ noted that inflation remains near the upper end of the 1.0–3.0% target range but is expected to return to 2.0% by early 2026. Officials signaled room for further easing if disinflation continues. Additional pressure came from weak macro data: the NZIER Business Confidence Index dropped from 22.0% to 18.0% in Q3, and the Global Dairy Trade Index fell from –0.8% to –1.6% in September, threatening export revenues. Investors also remain focused on the prolonged U.S. shutdown, now entering its second week, with several federal agencies furloughed amid a political standoff in Congress.
USD/JPY
The U.S. dollar shows moderate gains in the USD/JPY pair during Asian trading, continuing the strong bullish trend that began late last week. The pair is testing 152.40 to the upside, marking new highs since February 14. The yen weakens as markets anticipate policy continuity following the weekend victory of Sanae Takaichi — the first woman ever to lead Japan’s ruling Liberal Democratic Party. Takaichi advocates a dovish monetary stance, lower taxes, military expansion, and renewed subsidies for small businesses. Consequently, the Bank of Japan is now less likely to raise borrowing costs, especially given mixed domestic inflation dynamics. Today’s Japanese macro data had little impact: household income growth slowed from 4.1% to 1.5% (expected 2.6%), the Eco Watchers Current Index rose from 46.7 to 47.1, and the Leading Index climbed from 47.5 to 48.5. Later today, at 20:00 (GMT+2), the Federal Reserve will release minutes from its September meeting — markets expect confirmation of an October and December rate cut path, with traders already pricing in a 95% chance of a 25-basis-point reduction in October. Investors are also awaiting updates on the U.S. shutdown, which has entered its second week.
XAU/USD
The XAU/USD pair continues its confident rally both in the short and medium term, holding above the key psychological level of 4000.00. The price is testing 4030.00 as traders attempt to forecast when the U.S. government shutdown will end. The shutdown began on October 1, forcing several federal agencies into unpaid leave after lawmakers failed to approve a new budget.
Analysts expect the Federal Reserve to cut rates by 25 basis points in October and again in December. The Bank of England and the European Central Bank may follow suit, while the Reserve Bank of New Zealand has already reduced its rate by 50 basis points, narrowing yield differentials — a factor that benefits gold, which yields no interest. Another driver for gold is rising geopolitical risk: France’s political crisis deepened after Prime Minister Sébastien Lecornu resigned. President Emmanuel Macron must now appoint a new prime minister or call early elections — a move that risks defeat due to his low approval ratings and rising anti-immigration sentiment.