Forex Overview: EUR/USD Holds Near 1.1657 as Traders Await Eurozone Data; GBP/USD and XAU/USD Gain Momentum

Forecasts suggest the monthly figure will accelerate by 0.1% after –0.5% in the prior month, while the annual pace is expected to remain near 2.2%. At 19:00 (GMT+2), European Central Bank (ECB) President Christine Lagarde will speak and may comment on the inflation outlook and the possibility of another 25bp rate cut before year-end. Traders are also digesting Friday’s business-activity data: Germany’s S&P Global/Hamburg Commercial Bank (HCOB) index rose from 50.1 to 51.5 (vs. 52.5 expected), while the eurozone-wide reading increased from 50.7 to 51.3 (vs. 51.4 expected). Activity in the region is recovering on the back of large-scale defense spending and Germany’s ambitious infrastructure modernization plans. However, member states face widening deficits and cuts to social programs, heightening risks of new political tensions—such as in France, where the government is struggling to balance next year’s budget bill. Meanwhile, the ECB has at least managed to restrain inflation: Friday’s report showed producer prices down 0.6% y/y after a 0.2% rise in July (consensus –0.4%), and –0.3% m/m after 0.3% (vs. +0.1% expected). In the U.S., September labor-market data were not released due to the government shutdown. Participants evaluated services activity instead: the ISM services index fell from 52.0 to 50.0 (vs. 51.7 expected), while S&P Global’s reading eased from 54.5 to 54.2 (prelim 53.9).

GBP/USD

The pound is gaining in GBP/USD during the morning session, extending the late-last-week bullish impulse and holding near 1.3441. U.S. investors continue to watch negotiations between Democrats and Republicans in Congress, hoping for a near-term budget deal for the fiscal year that began on October 1. For now, the federal government remains shut, which is preliminarily estimated to cost GDP about $15.0 billion per week. The White House has indicated it could use the funding pause for significant staff and payment cuts across agencies. Notably, sterling largely ignored weak U.K. macro data on Friday: S&P Global’s September services PMI dropped sharply from 53.6 to 50.8 (vs. 51.9 expected), and the composite index fell from 53.0 to 50.1 (vs. 51.0 prelim). Today at 10:30 (GMT+2), S&P Global will publish September construction PMI, where a slight decline from 45.5 is expected. At 19:30 (GMT+2), Bank of England Governor Andrew Bailey speaks and may clarify prospects for lowering borrowing costs. At its September meeting, the BoE kept the policy rate at 4.00%, citing elevated inflation: annual CPI held at 3.8% in August, the highest since January 2024.

AUD/USD

The Australian dollar is trading sideways in AUD/USD during the Asian session, consolidating near 0.6600. Focus is on Australia’s September consumer inflation: the Melbourne Institute’s annual measure rose from 2.8% to 3.0%, while the monthly reading swung from –0.3% to +0.4%. As officials at the Reserve Bank of Australia (RBA) anticipated, price pressure showed a moderate uptick in September, which could keep the regulator in wait-and-see mode through year-end. Meanwhile, Friday’s services activity weighed on the aussie: S&P Global’s index slipped from 55.1 to 52.4 (52.0 expected). In the U.S., macro releases are sparse since the federal government went into furlough on Wednesday after lawmakers failed to agree on a new-year budget. Democrats argue for continued funding of health and social programs, while Republicans, aligned with President Donald Trump’s policy stance, seek deeper spending cuts. With September’s official labor report missing on Friday, analysts continued to parse ADP private-sector employment: the series was revised from –3.0k to –32.0k (vs. a prior 54.0k forecast), whereas the official print had been expected at +50.0k. The negative trend may pressure the Fed toward policy easing: markets look for at least two additional 25bp cuts by year-end. ISM services also fell from 52.0 to 50.0 (vs. 51.7 prelim).

USD/JPY

The U.S. dollar is advancing firmly in USD/JPY during Asian trading, testing 150.40 to the upside after opening with a bullish gap and printing new local highs since August 1. FX attention is on Japan’s Liberal Democratic Party leadership race: after two rounds, 64-year-old Sanae Takaichi won the leadership and, pending parliamentary approval on October 15, will become prime minister—the first woman to hold the post. Economically, she may advocate tax cuts and expanded direct-support programs for households, and could pursue defense reforms amid rising geopolitical risks. The yen drew modest support from Bank of Japan Governor Kazuo Ueda’s Friday remarks. He reiterated that policy tightening could continue if economic conditions align with the BoJ’s outlook, particularly on inflation. On U.S. tariffs, Ueda again noted their negative impact on exporter profits but pushed back on claims of deeper structural damage to Japan’s economy. Also on Friday, unemployment rose markedly from 2.3% to 2.6% (vs. 2.4% expected). U.S. investors, for their part, are tracking the shutdown’s trajectory. National Economic Council Director Kevin Hassett said the longer budget talks drag on, the higher the likelihood President Donald Trump resorts to mass federal-employee layoffs.

XAU/USD

XAU/USD is surging again, testing 3930.00 to the upside, marking fresh record highs and approaching the major 4000.00 resistance. Previously, investors penciled in a run at 4000.00 only for early next year; now some expect 4500.00—or even 5000.00 in 2026—under unfavorable macro circumstances. Gold is buoyed by expectations of further Fed rate cuts and the ongoing U.S. government shutdown, which shows no clear sign of ending. Even so, Senate Democrats could bring the government back online quickly by approving a continuing-resolution funding bill through November, which has already passed the House. The Fed, meanwhile, may attempt another 25bp cut in October, as the latest labor figures disappointed. With Friday’s official jobs report absent, analysts continue to lean on ADP’s private-sector employment data, which were revised from –3.0k to –32.0k (vs. a prior 54.0k forecast), even though the official print had been expected at +50.0k.