EUROPEAN FX UPDATE: USD fractionally higher, CHF hampered by CPI, AUD and GBP eye rate decisions

USD: DXY +0.2%; 98.89

• USD has kicked the week off on the front foot in a slight extension of last week's upside which was triggered primarily by the combination of a more hawkish-than-expected Fed announcement and a thawing in trade relations between China and the US. Over the weekend, newsflow has been relatively non-incremental aside from commentary by Fed's Waller who remarked that he still advocates for the Fed to cut rates in December and said data fog does not tell you to stop. Whilst official data releases are still lacking, this week will present a slew of private surveys, kicking off today with the ISM manufacturing print, which is expected to remain in contractionary territory vs. expectations of an expansionary print in the services metric on Wednesday. Elsewhere, traders will gain further insight into the performance of the US labour market this week with ADP and Challenger layoffs due on deck. Additionally, the prelim UoM release is due on Friday, which will also be parsed for inflation expectations amongst its respondents. Today's speaker docket includes Fed's Daly and Cook. DXY has risen as high as 99.92 with focus on a potential test of 100; not breached since August 1st (100.25 was the high that day).

EUR: EUR/USD -0.2%; 1.1513

• EUR is softer vs. the broadly firmer USD with incremental macro drivers for the Eurozone on the light side in the wake of last week's uneventful ECB policy announcement. Messaging since has reaffirmed the tone struck by ECB Lagarde with Nagel of Germany the latest to make the case that there is no need to adjust policy in the near-term based on the current outlook for the ECB. Note, Chief Economist Lane is due to speak @ 12:00GMT. Eurozone manufacturing PMI was unrevised at 50, as expected with the accompanying report noting that "demand across the eurozone economy remained subdued". On a more encouraging footing, China’s MOFCOM said China and the EU held in-depth and constructive talks on mutual export control concerns with both sides agreeing to maintain dialogue to support stable and smooth supply chains between the economies. Focus also remains on the French political situation with the French government set to begin closed-door discussions with lawmakers after Friday's failure to pass the proposed wealth tax - a measure which had been pivotal in getting the Socialist Party on board. EUR/USD has slipped to its lowest level since 1st August with a session trough @ 1.1511.

JPY: USD/JPY +0.1%; 154.14

• JPY is a touch lower vs. the USD with USD/JPY holding above the 154 mark. Japan was away from market overnight with newsflow surrounding Japan subsequently on the light side. Nonetheless, markets remain focused on the Japanese government's pain threshold for further softness in the JPY after Finance Minister Katayama attempted to jawbone the currency on Friday, labelling recent moves in the Yen as "one-sided" and "rapid". The Japanese calendar is a light one this week aside from Cash Earnings data on Thursday. As it stands, markets price just a circa 28% chance of a BoJ rate hike in December. USD/JPY has ventured as high as 154.28 but is yet to test Friday's best @ 154.41.

GBP: GBP/USD -0.2%; 1.3131

• GBP is soft vs. the USD but flat vs. the EUR. Newsflow continues to centre on the November 26th budget with the latest reporting suggesting that UK Chancellor Reeves will target pensions of high earners and expensive homes. The potential outcomes for the budget are vast at this stage. However, consensus is gradually coalescing around the view that Reeves will attempt to establish a greater financial buffer via a range of tax increases (e.g. freezing income thresholds, expanding NIC coverage, etc) that are expected to be non-inflationary and growth restrictive. This is naturally expected to lead to a potentially looser hand by the BoE. However, this is not expected to have any bearing on this week's MPC announcement with policymakers set to keep policy unchanged until full details of the budget are known. That being said, the decision to do so will likely be subject to dovish dissent in the wake of the latest softer-than-expected inflation print and concerns over the fragility of the UK labour market. Elsewhere, UK manufacturing PMI has been revised a touch higher but ultimately still remains below the 50 mark. Cable has slipped to a low of 1.3118 but is holding above Friday's 1.3097 base.

Antipodeans: AUD/USD +0.1%; 0.6551. NZD/USD U/C 0.5720.

• Both are slightly more resilient than most peers vs. the USD with AUD managing to overlook a disappointing Chinese RatingDog Manufacturing PMI print overnight, which was hampered by a sharp decline in export orders. Instead, attention is on tomorrow's RBA policy announcement, with markets assigning a circa 94% chance of an unchanged rate in the wake of last week's hotter-than-expected Q3 inflation report. AUD/USD is currently sandwiched between its 100 and 50DMAs @ 0.6538 and 0.6563, respectively. NZD/USD is maintaining its status on a 0.57 handle with a session low @ 0.5714.

CHF: USD/CHF +0.2%; 0.8057. EUR/CHF +0.1%; 0.9285

• CHF is one of the laggards across the majors in the wake of softer-than-expected Swiss inflation data for October. Y/Y CPI unexpectedly slowed to 0.1% from 0.2% vs. consensus of a pick-up to 0.3%, whilst the M/M rate printed at just -0.3% (expected -0.1%, previous -0.2%); both prints were below the bottom-end of analyst forecasts. Note, the SNB looks for a Q4 average rate of 0.4%. Within the details, one of the biggest headwinds stemmed from imported deflation with the firmer CHF likely playing a role. Naturally, a depreciation in the CHF would be welcomed by SNB officials. However, their room to engineer such a move is limited by a reticence to take the policy rate below 0% and concerns that intervening in the currency could cause a conflict with the US administration. EUR/CHF has ventured as high as 0.9294 before running out of steam ahead of the 0.93 mark. As context, CHF is some 1.2% stronger vs. the EUR in 2025 and is the best YTD performer vs. the USD across the majors.

03 Nov 2025 - 10:00- ForexData- Source: Newsquawk