Forex investors are focused on the latest comments from Federal Reserve officials, which highlight divisions over the path of monetary policy. Yesterday, Federal Reserve Bank of San Francisco President Mary Daly said that labor market softening and easing inflation justified last month’s rate cut, allowing the Fed to maintain a dovish stance. By contrast, Michael Barr—considered a candidate to replace Chair Jerome Powell—urged caution, noting that with headline inflation still elevated, up-to-date macroeconomic data are needed before taking further steps. He forecast core inflation would exceed 3.0% by year-end and that headline inflation would not reach the 2.0% target before the end of 2027. Meanwhile, in the absence of federal statistics, economists at JPMorgan Chase & Co. and The Goldman Sachs Group Inc. estimated initial jobless claims at 235,000, up from 224,000, reflecting a deterioration in labor market conditions.

Eurozone

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

Today, Bank of France Governor François Villeroy de Galhau said political uncertainty is costing the country at least 0.2% of economic growth and risks further undermining business and consumer confidence. Even so, he judged the overall economic situation to be resilient and called for reducing the budget deficit to 4.8% of GDP by 2026. In addition, an ECB survey found that only about 15.0% of workers fear U.S. tariffs—currently at 13.1%—could lead to layoffs, though the materialization of such risks would negatively affect the outlook.

United Kingdom

The pound is weakening against its major peers—the euro, yen, and U.S. dollar.

According to a Recruitment & Employment Confederation survey, U.K. company headcount continued to decline in September and wages stagnated, as employers remain concerned about tax uprating in Chancellor Rachel Reeves’s November budget. The weakest trends were seen in retail and hospitality. Starting salaries barely rose, and pay growth for permanent staff was the slowest since March 2021.

Japan

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

It emerged today that the centrist Komeito party has broken its alliance with Japan’s Liberal Democratic Party (LDP) over fiscal disagreements, casting doubt on the appointment of new LDP leader Sanae Takaichi as prime minister. Analysts also argue that even if appointed, she may struggle to govern effectively. Meanwhile, the Corporate Goods Price Index accelerated from –0.2% to 0.3% m/m (beating the 0.1% forecast) and held at 2.7% y/y versus 2.5% expected. With inflation still above the Bank of Japan’s 2.0% target, the central bank may return to a more hawkish tone.

Australia

The Australian dollar is weakening against the euro and yen, with mixed performance versus the U.S. dollar and the pound.

Investors are focused on remarks by Reserve Bank of Australia Governor Michele Bullock, who told parliament that despite relatively low headline inflation, additional effort may be required to contain services inflation, which stands at 3.0%. Even so, she noted the economy remains resilient and urged a cautious approach to monetary policy adjustments.

Oil

Oil prices are correcting lower following the ceasefire agreement between Israel and the Palestinian group Hamas, which has sharply reduced the market’s risk premium.

The parties signed a ceasefire yesterday, ratified today by the Israeli government, providing for a partial withdrawal of troops from Gaza and the release of remaining hostages. Analysts hope implementation will end the maritime blockade of Israeli ports by Yemen’s Houthis, potentially increasing oil supply to the market and adding medium-term downside pressure on prices.