US FX WRAP: DXY gains on EUR weakness; CAD, Antipodes, and NOK outperform

Analysis details (20:32)

The Dollar Index was modestly firmer as concerns surrounding US regional banks eased on Friday due to the latest earnings reports within the space not signalling any further credit deterioration related to alleged fraud. DXY's gains were a function of modest EUR downside, while CAD strength was an offsetting factor. Further good news arrived via Trump on China, the US President reaffirmed the meeting with Xi in two weeks, and when asked if high tariffs on China will stand, Trump said no. The remarks added support for the US equity futures rebound from lows in the European morning. Despite credit concerns being trimmed on Friday, the dovish Fed repricing on Thursday largely remained, with money markets still fully pricing 50bps of easing by year-end. Elsewhere, the Atlanta Fed GDPnow model (Q3) was slightly revised up to 3.9% (prev. 3.8%), albeit this was solely due to the Treasury Monthly Statement on Thursday. At the Fed, Musalem (2025 voter) paved the way for another cut if downside labour market risks increase, while Kashkari (2026 voter) continues to sound caution with respect to inflation. DXY rose to ~98.40 from earlier 98.025 lows.

CAD, AUD, NZD, and NOK all saw strength vs USD; meanwhile, SEK & CHF were little changed, and EUR saw modest weakness. Currency-specific drivers were light to end the week, with remarks from ECB members and BoC's Governor Macklem the main events. The main message from ECB members is that of no imminent change to policy, with Kazaks saying they can take time took look at data. Wunsch argues that the chances that further rate cuts will be needed are receding and is comfortable with market pricing (~4bps of easing seen by year-end). Separately, BoC's Macklem said growth is not expected to feel strong and will not be enough to close the output gap; No major further decline in exports is expected, but neither is a rapid rebound. EUR/USD trades around 1.1670 from earlier 1.1728 highs, while USD/CAD hovers around 1.4014 lows.

Precious metals took a hit on Friday, giving back some of the strong October gains. Profit taking was likely a factor, giving the move was largely isolated. Gold dropped to ~ 4,220 from earlier 4,381 highs, with palladium seeing the steepest losses (-9%) amongst the big four. An independent metal trader writes, "I think Trump's more conciliatory tone since the initial 100% tariff announcement has taken a little heat out of the precious trade". Concerning the debasement trade, which some desks have been associating with the gold rally over the past couple of months, Rabobank writes, "Debasement would imply a move away from the USD and US treasuries into assets such as gold, and there is very little evidence to back up these flows". The firm argues that diversification of portfolios may prove a better explanation of the move into assets such as gold.

17 Oct 2025 - 20:32- ForexUS Research- Source: Newsquawk