Forex investors are focused on the escalating trade tensions with China. Last Thursday, Beijing announced tighter export controls, requiring foreign manufacturers to obtain a government license to sell any product containing more than 0.1% of rare earth elements extracted and processed using local technology.

These measures are expected to negatively impact the production of high-tech equipment, AI research, and the mining industry. In response, President Donald Trump announced a 100% tariff on Chinese imports starting November 1, a move that could accelerate consumer price growth and force the U.S. Federal Reserve to maintain high interest rates for longer. Recently, however, Trump softened his tone on Truth Social, saying that both he and President Xi Jinping want to avoid a depression in their national economies. Experts hope the upcoming meeting of the two leaders at the APEC summit in South Korea later this month will help ease trade tensions.

Eurozone: Currency Market Dynamics

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

Today, Germany’s September producer inflation data was released: wholesale prices rose from –0.6% to 0.2% month-on-month and from 0.7% to 1.2% year-on-year. Persistent growth in Germany’s indicators, the largest economy in the EU, could push consumer prices higher across the region. However, most ECB officials believe inflation remains close to the 2.0% target, and therefore the regulator is unlikely to adjust monetary policy again this year.

United Kingdom

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

Traders are watching comments from Bank of England board member Megan Greene, who stated that monetary easing will likely continue, though the pace of disinflation may slow. In September, she voted — alongside most of the Monetary Policy Committee — to keep the key rate at 4.00%, after opposing a 25-basis-point cut in August. Her latest comments suggest a greater likelihood of a rate adjustment at the next BoE meeting.

Japan

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

Markets are subdued today as Japan observes a public holiday, but attention remains on the ongoing political crisis: the ruling coalition collapsed after the Komeito party withdrew its support for the Liberal Democratic Party (LDP) over fiscal policy disagreements. As a result, the appointment of new LDP leader Sanae Takaichi as prime minister is uncertain. Her pledges of fiscal stimulus and calls for the Bank of Japan to avoid rate hikes have pressured the national currency. If opposition parties unite behind a single candidate, they could outvote the LDP, preventing Takaichi’s appointment. The uncertainty is likely to continue weighing on the yen in the short term.

Australia

The Australian dollar is gaining against the euro, pound, yen, and the U.S. dollar.

The positive momentum follows China’s new export restrictions on rare earth elements. Investors expect Australian mining companies to benefit as alternative suppliers. On Thursday at 02:30 (GMT+2), labor market data will be released: employment is projected to rise by 2.0% in September, while unemployment may edge up from 4.2% to 4.3%. This could prompt the Reserve Bank of Australia (RBA) to adopt a more dovish tone.

Oil

After an early morning rally, oil prices turned lower amid mixed factors. The ceasefire in Gaza reduced geopolitical risk premiums, and Yemen’s Houthis announced the end of their maritime blockade of Israel, easing supply logistics for Middle Eastern crude. Meanwhile, President Donald Trump’s plan to impose 100% tariffs on Chinese exports starting November 1 added further pressure to oil prices.

However, the downside is limited by expectations of renewed U.S.–China trade talks and rising Chinese crude imports, which increased by 3.9% year-over-year in September to 11.5 million barrels per day.