Global Forex Overview: USD Strengthens as Trade Tensions Grow

Investors and forex traders are closely watching developments in the U.S.–China trade conflict and awaiting signals regarding future actions by the Federal Reserve. The recent initiative by Beijing to expand control over the export of rare earth metals was met with a sharp response from President Donald Trump, who announced new 100% tariffs on Chinese goods starting November 1.

Market participants hope for a potential compromise during the upcoming personal meeting between U.S. President Donald Trump and Chinese leader Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) Summit in Seoul on October 31. Without an agreement, trade between the two largest economies could effectively halt, triggering a global downturn. A Goldman Sachs study notes that China currently controls 69% of global rare earth mining, 92% of processing, and 98% of magnet production. A mere 10% reduction in supply to the U.S. could cost the American economy $150 billion and accelerate inflation. Additionally, a Reuters survey of leading economists found that most expect the Federal Reserve to cut rates by 25 basis points in both October and December.

Eurozone

The euro weakens against the U.S. dollar and the pound but strengthens versus the yen.

Germany’s latest government report on tax revenues showed a 2.6% year-over-year increase in September. However, officials emphasized that leading indicators still do not suggest any “significant acceleration of economic growth in the short term.” Exports and industrial orders have declined for the fourth consecutive month, while industrial output recorded its sharpest drop in three years. Total tax revenues reached €88.4 billion in September due to higher wage tax receipts, while VAT revenue remained unchanged. From January to September, the cumulative figure rose 6.2% year-over-year to €665.0 billion.

United Kingdom

The British pound weakens against the U.S. dollar but gains ground versus the euro and yen.

Investors and forex traders are focused on public borrowing data, which reached record levels in the first half of the fiscal year, excluding the COVID-19 pandemic peak. Total borrowing for the first six months stood at £99.8 billion — 13% higher than last year and £7.2 billion above forecasts. In September alone, the government borrowed £20.2 billion, largely to cover interest payments on existing debt. This increase offset higher tax revenues, including employer contributions to social insurance, raising the likelihood of additional tax obligations in the upcoming budget.

Japan

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

Pressure on the Japanese currency follows the election of Liberal Democratic Party leader Sanae Takaichi as the country’s new prime minister. Traders expect her administration to slow or suspend the Bank of Japan’s tightening program and introduce fiscal stimulus measures. However, some analysts remain cautiously optimistic, noting that former Regional Economy Minister Satsuki Katayama — a known yen supporter — could become the next Finance Minister. On Wednesday at 01:50 (GMT+2), Japan will release September trade data: forecasts point to a 0.6% rise in imports and a 4.6% increase in exports, confirming stable economic performance and strengthening the case for a future rate hike by the Bank of Japan.

Australia

The Australian dollar weakens against the euro, pound, and U.S. dollar but shows mixed movement versus the yen.

Investors are focused on the rare earth and minerals agreement signed between the U.S. and Australia by President Donald Trump and Prime Minister Anthony Albanese. The deal includes $8.5 billion in planned investments, with $3.0 billion directed toward critical mining projects within the next six months. Officials stated that the initiative could unlock mining projects worth $53.0 billion, reducing dependence on Chinese imports.

Oil

Crude oil prices show mixed dynamics: initial growth gave way to a decline. Overall, the oil market has stabilized as fears of an escalating U.S.–China trade conflict and a resulting global slowdown balance expectations of imminent monetary easing by the Federal Reserve. This limits further strengthening of the U.S. dollar. Today at 22:30 (GMT+2), the American Petroleum Institute (API) will release its weekly report: last time, inventories rose by 3.524 million barrels, far exceeding the forecast of 0.120 million. A continuation of this trend could add pressure on oil prices.