EUROPOEAN FX UPDATE: High-beta propped up by US-Sino optimism, CAD overlooks US tariffs

USD: DXY -0.1%; 98.853

• The dollar index remains rangebound and within Friday's parameters with the greenback softer versus risk-sensitive currencies but holding a firmer bias against havens following the optimistic US-China developments over the weekend.


• US reached a consensus with China ahead of Trump-Xi talks on Thursday and with the US tariff increase on China averted, while China was said to have agreed to delay a new rare earth exports licensing regime for a year. ING posits that, assuming the Trump-Xi meeting turns out to be bullish, USD could actually be pressured as demand for the CNY also supports other EMs.


• Stateside, the data blackout remains amid the US government shutdown, with Q3 GDP this week also likely to be shelved. There is seemingly no end date to the shutdown, with the Fed's visibility also affected. The upcoming FOMC October meeting on Wednesday (at 18:00 GMT amid the UK clock change) is expected to deliver a 25bps rate cut to 3.75-4.00%, with a further reduction anticipated in December, according to a Reuters poll. Money markets are fully pricing a 25bps cut and are pricing a very high chance of a December reduction (~ 23bps of cuts priced in for Dec assuming a 25bps September cut).


• Sticking with the Fed, US President Trump said maybe by the end of the year they'll make a decision on the Fed, whilst Treasury Secretary Bessent shortlisted five candidates for the next Chair.


• DXY resides in a current 97.77-98.99 range at the time of writing, still within the Friday range of 98.73-99.10.

EUR: EUR/USD +0.1%; 1.1633

• Little change in the Single Currency amid an overall flat Dollar and little follow-through for the US-China trade deal. The EU and China attempt to navigate their own bilateral relationship, with Chinese Premier Li and EU Council President Costa meeting, whilst Costa said he shared a strong concern with Li about expanding export controls on critical raw materials.


• In terms of this morning's releases, a mixed German Ifo survey hardly moved the dial, with Current Conditions declining more than expected whilst Business Climate and Expectations rose past the priors and forecasts. The Ifo head also sounded more optimistic and suggested expectations are increasing in all sectors, whilst the German economy has not yet lost hope for an upward recovery.


• Elsewhere, the ECB Survey on the Access to Finance of Enterprises noted inflation expectations remained unchanged across horizons, and firms continue to report upside risks to their long-term inflation outlook, broadly unchanged compared with the previous round.


• EUR/USD resides in a 1.1618-1.1648 range at the time of writing, within Friday's 1.1601-1.1649 parameter and with the 100 DMA and 50 DMA to the upside at 1.1661 and 1.1686, respectively.

JPY: USD/JPY U/C; 152.76

• Oscillated around the 153.00 level overnight with price action indecisive as tailwinds from the positive risk sentiment were offset following firmer-than-expected Services PPI data from Japan.


• Heading into European trade, the pair dipped back under 153.00 and incrementally edged lower as the optimism in Europe somewhat waned off best levels despite a lack of fresh drivers.


• Tailwinds for the JPY could also be a function of optimism surrounding a meeting between US President Trump and the new Japanese PM Takaichi, last week she expressed hopes of new heights in US-Japan relations.


• Further this week, the BoJ is poised to announce its latest decision on Oct 30th, with markets currently pricing an 81% of a hold, with some 46% chance of a 25bps hike by year-end.


• USD/JPY resides closer to the bottom end of a 152.66-153.25 intraday range at the time of writing. Next upside level is the peak from October 10th (153.27).

GBP: GBP/USD +0.2%; 1.3334

• On a mildly firmer footing with the high-beta currency propped up by the overall risk appetite across the markets.


• Comments from UK Chancellor Reeves, speaking in Riyadh, had little effect on Sterling, with less than a month to go till the Autumn Budget. On trade, the Chancellor suggested taking US President Trump seriously was key in the UK-US trade deal, whilst the UK had really good meetings around a UK-GCC trade deal in Riyadh, and she's confident that she can get the deal over the line.


• GBP/USD trades within Friday's 1.3287-1.3364 range, in a current 1.3311-1.3339 parameter.

CAD: USD/CAD -0.2%; 1.3974

• US President Trump announced the US is to immediately raise tariffs on Canada by another 10% because of the fraudulent ad misrepresenting Ronald Reagan’s view on tariffs. Trump said Canada has been ripping the US off for a long time, and they're not going to do it anymore.


• The Loonie has largely overlooked these and moves in tandem with high-beta peers amid the optimistic US-China updates.


• USD/CAD has fallen back under 1.4000 and resides towards the lower end of a 1.3973-1.4010 range.

Antipodeans: AUD/USD +0.5%; 0.6551. NZD/USD +0.2%; 0.5759

• Outperformed due to their high-beta statuses and China exposure amid the US-China trade optimism, while the PBoC also set the strongest USD/CNY reference rate setting in just over a year.


• AUD is propped up by a surge in base metals amid the aforementioned optimism, with RBA Governor Bullock saying little to move the Aussie this morning.


• AUD/USD in a 0.6528-0.6555 range, with the 100 DMA at 0.6536 and the 50 DMA at 0.6552. NZD/USD sees shallower gains amid the AUD/NZD cross' rise above 1.1350.

27 Oct 2025 - 09:55- ForexData- Source: Newsquawk