USD Weakens as Inflation Cools; Euro and Pound Strength

Investors and forex traders are assessing September inflation data: the Consumer Price Index slowed from 0.4% to 0.3% month-on-month and from 2.9% to 3.0% year-on-year, below forecasts of 3.1%. The core indicator also eased from 0.3% to 0.2% and from 3.1% to 3.0%, respectively, increasing expectations of monetary policy easing by the U.S. Federal Reserve at the upcoming meeting. Most analysts now anticipate the Fed will cut the interest rate by 25 basis points this month and by another 25–50 basis points in December. Additionally, the White House has confirmed a meeting between U.S. President Donald Trump and Chinese President Xi Jinping on October 30 at the Asia-Pacific Economic Cooperation (APEC) summit. Analysts hope the two leaders will reach a compromise to reduce global economic slowdown risks. Meanwhile, Trump announced that trade talks with Canada will be paused following the airing of an advertisement in Ontario featuring the voice of former U.S. President Ronald Reagan criticizing tariffs. The Ronald Reagan Foundation stated that the ad distorted his original 1987 remarks.

Eurozone

The euro strengthens against the yen and the U.S. dollar but shows mixed performance versus the pound.

Investors and forex traders focus on October business activity data in the eurozone: the manufacturing PMI rose from 49.8 to 50.0 points, returning to positive territory; the services PMI climbed from 51.3 to 52.6, beating expectations of 51.2, and the composite index improved from 51.2 to 52.2 against a forecast of 51.0. In Germany, the manufacturing index rose from 49.5 to 49.6, the services index from 51.5 to 54.5 (forecast: 51.1), and the composite from 52.0 to 53.8 (forecast: 51.6). These stronger-than-expected results were driven by the fastest increase in new orders in 2.5 years.

United Kingdom

The pound strengthens against the yen and the U.S. dollar but shows mixed dynamics versus the euro.

September business activity data was positive: the manufacturing PMI rose from 46.2 to 49.6, nearing the growth zone; the services PMI increased from 50.8 to 51.1, beating the 51.0 forecast, and the composite index climbed from 50.1 to 51.1 compared to expectations of 50.6. These indicators, along with new order volumes, approached yearly highs, while job losses hit their lowest level since May. In addition, retail sales grew 0.5% month-on-month versus a forecast of –0.2% and 1.5% year-on-year versus expectations of 0.6%. However, domestic businesses remain cautious, anticipating higher taxes in the government’s upcoming autumn budget.

Japan

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

Investors are focused on macroeconomic data: the national CPI rose from 2.7% to 2.9% year-on-year, while the core CPI also accelerated from 2.7% to 2.9%, driven by a 7.6% increase in energy and food prices in September. Inflation remains above the Bank of Japan’s target, raising expectations of imminent monetary tightening. Conversely, the manufacturing PMI fell from 48.5 to 48.3 (forecast: 48.8), services PMI dropped from 53.3 to 52.4, and the composite index declined from 51.9 to 50.9 — the sharpest industrial slowdown in 19 months due to a steep decline in new orders, partly offset by resilience in the services sector.

Australia

The Australian dollar shows mixed performance against the euro, the pound, the yen, and the U.S. dollar.

In October, the manufacturing PMI slipped from 51.4 to 49.7, entering the stagnation zone, while the services PMI rose from 52.4 to 53.1, pushing the composite index higher from 52.4 to 52.6. Thus, the manufacturing sector remains under pressure from global trade instability, while services continue to support the economy. Nonetheless, the data increases the likelihood of a dovish policy return by the Reserve Bank of Australia (RBA).

Oil

Oil prices attempt moderate growth following new U.S. sanctions against major Russian oil producers, Rosneft and Lukoil, which together account for more than 4 million barrels per day. By November 21, global companies must terminate existing agreements with Russian crude suppliers. Analysts expect further clarity on the sanctions’ impact on energy flows. While Russian supplies may not disappear entirely, OPEC representatives have stated they are ready to offset any potential shortages if needed.