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In focus today

In the euro area, focus turns to the German ZEW index which is one of the first sentiment indicators for October. The indicator has declined in recent months due to both weaker economic assessments and expectations in contrast to the rising PMIs. We expect a small improvement in the index in October.

In the UK, the monthly labour market report is released. Employment has declined throughout the year, but the pace has been very modest. Wage growth has been edging lower but remains elevated. An accelerating job loss is probably needed to put a November cut from the Bank of England back on the table.

Overnight, China will release CPI and PPI for September. CPI moved into negative in August at -0.4% headline inflation. It was driven by lower food prices, though, and core inflation stood at 0.9%. In September we look for a small increase in headline CPI to -0.2% y/y while core inflation is expected to be flat. PPI will likely stay negative but move up from -2.9% y/y to around -2.5% y/y.

During the week, we will look for news on negotiations of a new coalition government in Japan. The parliamentary vote on the country's next PM was postponed after the small Buddhist party, Komeito, turned its thumps down on a continuation of the current LDP-Komeito coalition. The vote will likely take place on Monday.

Economic and market news

What happened yesterday

In the US, the Bureau of Labor Statistics (BLS) published a statement saying that the September CPI will be released on 24 October. The statement also iterated that no other releases will be rescheduled or produced until the resumption of regular government services. This implies that the CPI figures will be released during the FOMC blackout ahead of the October MP meeting.

In global trade, US Treasury Secretary Scott Bessent confirmed that President Trump remains on track to meet Chinese President Xi Jinping in South Korea later this month to discuss de-escalating trade tensions. Bessent noted that lines of communication have reopened, and the 100% tariffs announced on Friday could still be avoided if progress is made before 1 November. This, together with other comments received over the weekend and during Monday, largely helped keep markets calm during Monday's trade.

However, in a new escalation of the conflict, China stated that it has begun collecting additional port fees on US-linked vessels, while the US will impose similar fees starting today, 14 October. China's fees target US-linked ships but exempt Chinese-built vessels, while the US also specifically aims to counter China's dominance in global shipping and shipbuilding. Analysts estimate that China-owned container carrier COSCO could bear nearly half of the USD 3.2bn in expected industry costs by 2026.

In the Gaza War, Hamas freed the last Israeli hostages while Israel released nearly 2,000 Palestinian detainees under a US-brokered ceasefire. President Trump declared the war over in a speech to the Knesset, calling it a "long nightmare" for both sides. At a summit in Egypt, over 20 world leaders discussed the Gaza Strip's reconstruction and governance, but challenges remain, including aid delivery, governance, and recovering the remains of deceased hostages.

In geopolitics, Ukrainian President Zelenskiy is set to meet US President Trump on Friday in Washington to discuss air defence systems, the potential supply of long-range Tomahawk missiles, and a landmark drone technology-sharing deal. The talks come as Russia escalates strikes on Ukraine's energy infrastructure, forcing Kyiv to consider importing electricity. Discussions will also cover Ukraine's energy needs and shifting Russian tactics.

Equities: US equities rebounded on Monday following Friday's selloff. The S&P 500 rose 1.6% and the Nasdaq gained 2.2%, although the move was not enough to fully offset Friday's losses. European and Nordic markets saw more modest gains - the Stoxx 600 added 0.4% - but had also held up better into Friday's close. Overall, it was a classic rebound session, with sectors that underperformed on Friday leading the recovery, particularly US big tech. Futures in both the US and Europe are little changed this morning, so recouping the losses from Friday looks to take some time.

FI and FX: The US bond market was closed due to Columbus Day, but the equity market rallied as the trade tensions between US and China eased together with a de-escalation in the Middle East and a continued rally in AI stocks. European yields declined modestly and the spread between Germany and France stabilized, while the BTPS-Bund spread tightened.

Daily Pivots: (S1) 1.1542; (P) 1.1586; (R1) 1.1614; More…

Intraday bias in EUR/USD remains neutral as consolidations continue above 1.1540. Deeper decline is expected as long as 1.1778 resistance holds. On the downside, break of 1.1540 will resume the fall from 1.1917 to 1.1390 , or further to 38.2% retracement of 1.0176 to 1.1917 at 1.1252.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top is likely in place at 1.1917, just ahead of 1.2 key psychological level. As long as 55 W EMA (now at 1.1274) holds, the up trend from 0.9534 (2022 low) is still extended to continue. Decisive break of 1.2000 will carry larger bullish implications. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep outlook bearish.

Daily Pivots: (S1) 151.86; (P) 152.16; (R1) 152.59; More...

Intraday bias in USD/JPY remains neutral and more consolidations could be seen below 153.26. Downside should be contained above 149.95 resistance turned support. Break of 153.26 will target 100% projection of 142.66 to 150.90 from 145.47 at 153.71. Firm break there will pave the way to 161.8% projection at 158.80. However, decisive break of 149.95 will bring deeper pullback to 55 D EMA (now at 148.48) instead.

In the bigger picture, current development suggests that corrective pattern from 161.94 (2024 high) has completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94 high. On the downside, break of 145.47 support will dampen this bullish view and extend the corrective pattern with another falling leg.

Daily Pivots: (S1) 1.3309; (P) 1.3338; (R1) 1.3360; More...

Intraday bias in GBP/USD remains neutral and more consolidations could be seen above 1.3260. Overall outlook is unchanged that corrective pattern from 1.3787 is extending. Below 1.3260 will bring deeper decline but strong support should be seen from 1.3140 cluster (38.2% retracement of 1.2099 to 1.3787 at 1.3142) to contain downside. On the upside, break of 1.3526 will bring stronger rally back to retest 1.3728/87 resistance zone.

In the bigger picture, rise from 1.0351 (2022 low) is still seen as a corrective move. Further rally could be seen to 61.8% projection of 1.0351 to 1.3433 (2024 high) from 1.2099 (2025 low) at 1.4004. But strong resistance could emerge from 1.4248 (2021 high) to limit upside. Sustained break of 55 W EMA (now at 1.3173) will argue that a medium term top has already formed and bring deeper fall back to 1.2099.

Daily Pivots: (S1) 0.8009; (P) 0.8033; (R1) 0.8067; More…

Intraday bias in USD/CHF remains neutral and more consolidations could be seen below 0.8075. Price actions from 0.7828 are currently seen as correcting whole fall from 0.9200. Above 0.8075 will target 0.8170 resistance next. On the downside, though, break of 0.7944 support will bring retest of 0.7828 low instead.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).

Daily Pivots: (S1) 1.4002; (P) 1.4021; (R1) 1.4059; More...

USD/CAD's rally resumed by breaking through 1.4033 and intraday bias is back on the upside. Sustained trading above 1.4014/7 will suggest that USD/CAD is already reversing the whole fall from 1.4719, and target 61.8% retracement at 1.4312. On the downside, below 1.3975 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 1.4017) holds. However sustained trading above 1.4014 will suggest that it's more likely just a correction, and the larger up trend would be in favor to resume through 1.4791 at a later stage.

Daily Pivots: (S1) 0.6492; (P) 0.6513; (R1) 0.6534; More...

AUD/USD falls sharply today but stays above 0.6472 temporary low. Intraday bias remains neutral first and more consolidations could be seen. Still, risk will remain on the downside as long as 0.6628 resistance holds. Current development suggests rejection by 0.6713 fibonacci resistance. Below 0.6472 will resume the fall from 0.6706 to 0.6413 cluster support (38.2% retracement of 0.5913 to 0.6706 at 0.6403).

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. Outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, sustained break of 0.6713 will be a strong sign of bullish trend reversal, and pave the way to 0.6941 structural resistance for confirmation.

Sentiment soured sharply in Asian markets, led by a steep selloff in Japan where the Nikkei reversed early gains to fall more than 3%. The downturn reflected a mix of political uncertainty in Tokyo and renewed caution over U.S.–China trade tensions. After months of strong gains, Japanese equities appear to have reached a point where investors are pausing to reassess the outlook amid rising volatility and shifting policy expectations.

The source of anxiety lies partly in Japan’s unfolding leadership transition. While LDP leader Sanae Takaichi remains widely expected to become Japan’s next prime minister, her path to confirmation has been complicated by the breakup with coalition partner Komeito. The split has introduced a small but symbolic risk that an opposition figure could be elected by parliament later this month — a scenario still viewed as unlikely but unsettling enough to spark caution among investors.

Adding to the uncertainty, Finance Minister Katsunobu Kato emphasized today that “inflation, rather than deflation, has become a challenge for us now.” He emphasized the need for policies suited to this new environment, implying that Japan is unlikely to return to a full-fledged “Abenomics” reflationary stance even if Takaichi takes office. The remarks reinforce expectations that fiscal and monetary policies may remain more balanced, tempering hopes for aggressive stimulus measures that had previously fueled market optimism.

Beyond domestic politics, escalating U.S.–China trade tensions also weighed on investor sentiment. With Washington and Beijing trading fresh barbs over tariffs and rare earth restrictions, Japanese exporters face renewed headwinds. After a strong rally since April, profit-taking was perhaps overdue, and today’s selloff appears to reflect a broader correction rather than a fundamental shift in outlook.

Overall in the currency markets, Aussie led declines, followed by Kiwi and Loonie, all under pressure from the deterioration in sentiment and weaker equities. In contrast, the safe-haven trio, Yen, Swiss Franc and Euro, gained. Dollar and British Pound held in mid-range.

In Asia, at the time of writing, Nikkei is down -2.68%. Hong Kong HSI is down -0.19%. China Shanghai SSE is up 0.21%. Singapore Strait Times is down -0.22%. Japan 10-year JGB yield is down -0.00at 1.663. Overnight, DOW rose 1.29%. S&P 500 rose 1.56%. NASDAQ rose 2.21%.

RBA minutes signal caution as board flags risk of hotter Q3 inflation

RBA’s September meeting minutes confirmed a steady hand on policy, with members concluding there was “no need for an immediate reduction” in the cash rate. The Board agreed that the economic data and forecasts since August supported maintaining the current level of restrictiveness, while emphasizing that decisions will remain “cautious and data dependent.”

Discussions focused heavily on inflation risks, particularly after stronger readings in the monthly CPI indicators for July and August. While acknowledging that these data are partial and volatile, members noted that upside surprises in market services and housing costs suggest the September quarter CPI could come in higher than expected in August forecasts.

The minutes revealed growing concern that if this pattern continues, the Bank’s assumptions about the balance between aggregate demand and supply could be too optimistic. Members also referenced lessons from abroad, where services inflation has proven stubbornly elevated, as a warning for domestic policy calibration.

Still, the Board recognized that risks remain "two-sided". On the upside, consumption could recover faster than assumed, or capacity pressures could prove stronger. On the downside, members highlighted the drag from weak consumer sentiment, slower employment growth, and subdued wage indicators.

The balance of views suggests the RBA will tread carefully in coming months, awaiting confirmation from the full Q3 inflation report before deciding whether further policy easing remains justified at the November meeting.

New Philly Fed chief Paulson backs gradual easing toward neutral policy

New Philadelphia Fed President Anna Paulson used her debut speech to call for a balanced approach to monetary policy as the economy navigates rising labor market risks and uncertain inflation dynamics.

She said policy should move toward a “more neutral stance,” stressing that the Fed must weigh both sides of its mandate. While she noted that the job market remains solid overall, she warned that conditions are “moving in the wrong direction” and that risks are “noticeably” increasing.

Paulson indicated she supports a measured pace of rate cuts consistent with the Fed’s latest projections, which outlined a quarter-point reduction last month and an additional 50 basis points of easing before the end of 2025, followed by further cuts in subsequent years.

On inflation, Paulson acknowledged that the recent tariff hikes could lift prices modestly, but said she does not expect those effects to persist. Still, she cautioned against rushing into deeper rate reductions given uncertainty over where the neutral rate truly lies.

Gold and Silver shatter key barriers as bull run accelerates - 5000 and 60 next

The precious metals rally showed no sign of fatigue, with Gold surging beyond 4,000 and Silver clearing 50 in a powerful continuation of their uptrend. Neither milestone proved a deterrent, as safe-haven demand strengthened amid renewed global uncertainty. Although initial market reactions to the latest U.S.–China trade tensions were subdued, investors have steadily rotated back into metals, betting that geopolitical instability will sustain demand well into 2026.

The rally has now reached a stage where institutional forecasts are catching up to price reality. On Monday, Bank of America became the first major institution to lift its long-term targets, projecting Gold at 5,000 per ounce in 2026 and Silver at 65.

Silver remains the outperformer, up about 80% year-to-date, compared with a 55% rise in gold. However, the surge has not come without risks. Some analysts caution that as liquidity improves and industrial demand fluctuates, volatility could increase in the near term. The latest spike has also been fueled by a temporary shortage in physical supply, which is expected to ease soon.

Technically, Gold’s next immediate focus lies at 100% projection of 2,584.24 to 3,499.79 from 3,267.90 at 4,183.45. Resistance could emerge there, prompting some profit-taking on first test. Break below 3,944.57 support would signal short-term topping and consolidation. However, sustained strength above 4,183.45 would pave the way toward 161.8% projection at 4,749.25 next.

In the broader view, now that 261.8% projection of 1,160.17 to 2,074.84 from 1,614.60 at 4,009.21 is cleared, Gold could be heading towards 361.8% projection at 4.923.87, which is close to 5000 psychological level. The technical setup aligns closely with the latest upward revisions from institutional forecasts.

For Silver, near term outlook will stay bullish as long as 48.35 support holds. Next target is 161.8% projection of 28.28 to 39.49 from 36.93 at 55.06. Firm break there will target 200% projection at 59.35, which is close to 60 psychological level.

In the bigger picture, the up trend remains in acceleration phase, and could further stretch to 261.8% projection of 21.92 to 34.84 from 28.28 at 62.10 in the medium term.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6492; (P) 0.6513; (R1) 0.6534; More...

AUD/USD falls sharply today but stays above 0.6472 temporary low. Intraday bias remains neutral first and more consolidations could be seen. Still, risk will remain on the downside as long as 0.6628 resistance holds. Current development suggests rejection by 0.6713 fibonacci resistance. Below 0.6472 will resume the fall from 0.6706 to 0.6413 cluster support (38.2% retracement of 0.5913 to 0.6706 at 0.6403).

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. Outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, sustained break of 0.6713 will be a strong sign of bullish trend reversal, and pave the way to 0.6941 structural resistance for confirmation.

The precious metals rally showed no sign of fatigue, with Gold surging beyond 4,000 and Silver clearing 50 in a powerful continuation of their uptrend. Neither milestone proved a deterrent, as safe-haven demand strengthened amid renewed global uncertainty. Although initial market reactions to the latest U.S.–China trade tensions were subdued, investors have steadily rotated back into metals, betting that geopolitical instability will sustain demand well into 2026.

The rally has now reached a stage where institutional forecasts are catching up to price reality. On Monday, Bank of America became the first major institution to lift its long-term targets, projecting Gold at 5,000 per ounce in 2026 and Silver at 65.

Silver remains the outperformer, up about 80% year-to-date, compared with a 55% rise in gold. However, the surge has not come without risks. Some analysts caution that as liquidity improves and industrial demand fluctuates, volatility could increase in the near term. The latest spike has also been fueled by a temporary shortage in physical supply, which is expected to ease soon.

Technically, Gold’s next immediate focus lies at 100% projection of 2,584.24 to 3,499.79 from 3,267.90 at 4,183.45. Resistance could emerge there, prompting some profit-taking on first test. Break below 3,944.57 support would signal short-term topping and consolidation. However, sustained strength above 4,183.45 would pave the way toward 161.8% projection at 4,749.25 next.

In the broader view, now that 261.8% projection of 1,160.17 to 2,074.84 from 1,614.60 at 4,009.21 is cleared, Gold could be heading towards 361.8% projection at 4.923.87, which is close to 5000 psychological level. The technical setup aligns closely with the latest upward revisions from institutional forecasts.

For Silver, near term outlook will stay bullish as long as 48.35 support holds. Next target is 161.8% projection of 28.28 to 39.49 from 36.93 at 55.06. Firm break there will target 200% projection at 59.35, which is close to 60 psychological level.

In the bigger picture, the up trend remains in acceleration phase, and could further stretch to 261.8% projection of 21.92 to 34.84 from 28.28 at 62.10 in the medium term.

Summary

U.S.-China trade tensions are again front and center following the developments of late last week. China's plan to impose strict export controls, especially on rare earth minerals, were matched by new tariff threats from President Trump. While rhetoric eased this past weekend, a November 1 target date for the imposition of Chinese export restrictions and higher U.S. imposed tariffs elevate the probability of the U.S. and China slipping into a downside trade war scenario. In the context of U.S.-China tensions, mid-October to November 1 is a lot of time with many potential twists and turns along the way. In that sense, we updated our U.S.-China Trade War 2.0 scenarios for how China's economy and currency could perform should relations deteriorate, improve, or hold steady. For now, we believe the U.S. and China will remain in our "restrained trade war" base case scenario, although risks are tilted toward our downside scenario materializing.