Meanwhile, forex investors are closely following France’s political crisis. After only 27 days in office — an all-time record — French Prime Minister Sébastien Lecornu resigned before he could even form a new government. Lecornu, the fifth head of government in two years and former defense minister, has triggered renewed calls from the opposition to dissolve parliament and even consider impeaching President Emmanuel Macron. The French leader now faces the challenge of negotiating with the left-wing bloc, which could lead to a reorientation of key national policies.

Earlier macroeconomic data from the eurozone reflected a slowdown in August retail sales — from 2.1% to 1.0% year-on-year — and a slight monthly increase of 0.1% following –0.4%. In the U.S., investors continue to monitor the ongoing government shutdown: the federal government remains unfunded as Republicans and Democrats failed to reach a budget agreement for the new fiscal year. It remains unclear how negotiations are progressing, but every week of forced furloughs for federal employees is estimated to shave 0.1–0.2 percentage points off GDP growth.

GBP/USD

The British pound is losing ground against the U.S. dollar in the morning session, retreating after yesterday’s brief bullish impulse. The pair is testing support near 1.3445 as traders await fresh catalysts. Today’s housing price data from Halifax Bank Plc put moderate pressure on the pound: the annual index slowed from 2.2% to 1.3%, the quarterly reading declined from 0.3% to –0.3%, missing the 0.2% forecast.

Additional downside risks stem from potential industrial turbulence: the U.K. steel sector could suffer from the European Commission’s plan to impose a 50% tariff on steel imports — with roughly 80% of British exports going to the EU, such duties could prove crippling. British manufacturers would also struggle to compete with cheaper Chinese products on new markets. The EU, meanwhile, remains tied to its trade agreement with the U.S., which obliges it to increase American steel imports. Tomorrow at 12:30 (GMT+2), the Financial Policy Committee will release its report along with the minutes from the Bank of England’s September meeting, where the regulator kept the key rate at 4.00%, citing rising inflation and growing uncertainty. In the U.S., statistics remain scarce amid the ongoing shutdown. Labor market data expected last week never arrived, and analysts now bet that the Federal Reserve might implement one more 25-basis-point rate adjustment in October.

AUD/USD

The Australian dollar is trading slightly lower against the U.S. dollar during the Asian session, testing the 0.6600 mark as downside pressure on the greenback persists due to expectations of another Fed rate cut in October. In September, the regulator reduced rates by 25 basis points and signaled readiness to ease monetary policy further if economic conditions allow.

The dovish stance was largely driven by a weakening labor market, which has been cooling faster than anticipated. Since then, little has changed, and September’s labor data remains unavailable due to the ongoing shutdown, with federal workers on unpaid leave. Australian macro data released earlier provided some support for the local currency: annual inflation, according to the Melbourne Institute, rose from 2.8% to 3.0%, while monthly CPI increased by 0.4% after –0.3%. On September 30, the Reserve Bank of Australia (RBA) kept rates unchanged at 3.60%, their lowest level since April 2023. Officials noted that inflation could exceed forecasts in Q3, adopting a cautious stance that suggests no further easing before year-end.

USD/JPY

The U.S. dollar is showing modest gains against the Japanese yen during the Asian session, extending the bullish momentum from late last week. The pair is testing 150.40 to the upside, renewing highs last seen on August 1. Market activity remains subdued as investors hesitate to open new long positions after the sharp early-week rally. Meanwhile, the yen is under pressure following the election of Japan’s new prime minister — Sanae Takaichi, the first woman in the country’s history to hold the position, elected as leader of the Liberal Democratic Party over the weekend. She is expected to formally assume office by October 15. Against this backdrop, the Bank of Japan may reconsider plans for further monetary tightening, though markets still expect at least one more rate hike this year. The U.S. dollar remains constrained by the ongoing government shutdown: senators failed to approve the stopgap funding bill extending operations until November 21, rejecting it by a 52–42 vote (60 required for passage). President Donald Trump has since announced the start of talks with Democratic representatives. Until federal employees return to work, U.S. data flow remains limited, and most analysts do not expect government operations to resume this week. Japan’s latest macro data had little market impact: household spending rose 2.3% in August after 1.4% previously (vs 1.2% forecast), the leading indicators index climbed from 106.1 to 107.4 (forecast 107.1), while the coincident index edged down from 114.1 to 113.4.

XAU/USD

The XAU/USD pair is showing mixed dynamics in early trading, consolidating near 3960.00 and new record highs. The instrument is hovering close to strong resistance and the key psychological level of 4000.00. Gold demand remains stable amid the prolonged U.S. government shutdown, which could last several more weeks. On Monday, the Senate failed to pass the short-term funding bill to keep the government open until the end of November. Another attempt is expected this week, but comments from Democratic lawmakers offer little optimism. Political tensions in France also support gold: after only 27 days in office, Prime Minister Sébastien Lecornu resigned before forming a new government.