\u201cOverall, fundamentals are<\/em> <\/em>expected<\/em> <\/em>to<\/em> <\/em>lead<\/em> <\/em>the<\/em> <\/em>SUD next<\/em> <\/em>week.<\/em> <\/em>The<\/em> <\/em>US<\/em> <\/em>Government shutdown<\/em> <\/em>should <\/em>it be prolonged could weigh on the USD, while the dovish market\u2019s expectations for the Fed could also weigh on the USD . \u201d<\/em><\/p>\n\n\n\n On a political level for the pound we note the UK Government\u2019s controversial plans for a compulsory digital ID card. Yet our interest lies mostly on UK Government\u2019s fiscal intentions as the situation is tense, with November\u2019s budget as a compass. UK Chancellor of the Ex Chequers Rachel Reeves, was reported stating that the government is facing difficult choices yet also pledged to maintain “taxes, inflation and interest rates as low as possible”, with the key words in our opinion being \u201cas possible\u201d. Hence we may see the UK Government maintaining a contractionary fiscal policy and further signals towards that direction could weigh on the GBP. It\u2019s characteristic of the market\u2019s worries for the UK outlook that UK 10-year gilt auction draws weakest demand since May, as per Reuters. Please note that on Friday, Fitch is to review UK\u2019s credit rating and a possible downgrading or in any case an adverse opinion could weigh on the pound. On a monetary level, we note the comments of BoE MPC member Catherine Mann that inflation in the UK and become persistently high. Yet at the same time she did not exclude the possibility of more rate cuts. Mann is considered in general as leaning on the hawkish side, yet nevertheless the comments may have enhanced market expectations for the bank to remain on hold which could be considered as supportive for the pound. We note the speech of BoE Governor Andrew Bailey on Monday as well as BoE Chief economist Huw Pill on Wednesday and any further hawkish comments could support the pound. On a macro level, we note the acceleration of the GDP rates for Q2, in a positive sign for the expansion of the UK economy. In the coming week, the pound traders\u2019 calendar is rather empty yet the Halifax house prices for September on Tuesday and the Construction PMI figure for the same month could generate some interest, yet other than that we may see fundamentals leading the pound.<\/p>\n\n\n\n Analyst\u2019s opinion (GBP)<\/em><\/p>\n\n\n\n \u201cOn the one hand we see the market\u2019s expectations for the BoE to remain on hold until the end of the year tends to be supportive for the pound. On the other hand though the fiscal tightness of the UK Government tends to weigh on the sterling.\u201d<\/em><\/p>\n\n\n\n JPY seems about to end the week stronger against the USD, but also the GBP and EUR in a signal of a wider strength of the Japanese currency. There are a number of factors supporting the JPY and BoJ\u2019s monetary policy intentions seem to be one of them. The market expects the bank to hike rates until the end of the year which tends to narrow the outlook of interest rate differentials with the fed and other central banks thus providing support for the JPY. Bloomberg reported that BoJ Deputy Governor Shinichi Uchida reaffirmed the Bank of Japan\u2019s standing policy to raise benchmark interest rates if the economy performs in line with forecasts. It should be noted that the comment was made after the release of the Tankan Indexes for Q3, which undershoot the market\u2019s expectations. Next Wednesday, we expect BoJ Governor Ueda\u2019s speech to be closely watched by JPY traders and a possibly hawkish tone could provide support for the Yen. JPY traders are turning their attention to the leadership election of the new leader of the LDP, which is to largely also decide Japan\u2019s new PM. The new Government is expected to influence Japan\u2019s fiscal policy but also the Japanese government\u2019s approach to BoJ\u2019s monetary policy. Frontrunners for the election seem to oppose BoJ\u2019s intentions to tighten its monetary policy. Overall, we view risks stemming from the LDP elections over the weekend as tilted to the bearish side for JPY. On a fundamental level, the uncertainty caused by geopolitical issues as well as the US Government shutdown may have provided some safe haven inflows for the JPY. Macroeconomics were not so favourable for JPY in the past few days given that the industrial output growth rate for August remained well in the negatives and retail sales for the same month also showed a contraction. In the coming week, we note the release of the current account balance for August as well as the Corporate Goods Prices for the same month.<\/p>\n\n\n\n Analyst\u2019s opinion (JPY)<\/em><\/p>\n\n\n\n \u201cJPY seems to be the winner for the week in the FX market, supported by BoJ\u2019s hawkish intentions as well as safe haven inflows for the Japanese currency. Should fundamentals continue to favour the Yen in the coming week, we may see it gaining further ground \u201d<\/em><\/p>\n\n\n\n The common currency seems to have been caught between conflicting fundamentals. On the one hand the worries for Russian aggressiveness tend to weigh on the common currency. A most recent example mentioned by the German press, is that the EU seems to be unprepared for a possible Russian air raid, and seems particularly vulnerable against Russian drones. If combined with the cold relationships with the US, or at best the viewing of US President Trump as untrustworthy, and the strong belief among Europeans that they cannot rely on the US for military assistance anymore, is expected to shift the EU\u2019s fiscal policies towards military spending. Also the pressure from US President Trump for the EU to stop buying Russian fuel does not pose well for the EUR. For the time being we view the issue as weighing on the common currency. On the other hand, though we note that the market\u2019s expectations for the ECB\u2019s monetary policy intentions as supportive for the single currency. Currently EUR OIS imply that the market awaits the bank to remain on hold, well beyond the end of the year. It\u2019s characteristic that Bloomberg reported that ECB President Lagarde stated that inflation risks are \u2018quite contained\u2019 in each direction, a statement implying that the bank may be in a good place with no mood to nor to ease nor to tighten its monetary policy. Such tendencies are expected to mildly support the EUR and in the coming week we note the planned speeches of ECB President Lagarde and other ECB policymakers for more clues about the bank\u2019s intentions. On a macroeconomic level, the slight acceleration of the HICP rate for the prior month on a preliminary level, tends to add a hawkish note to the market\u2019s expectations for the ECB\u2019s intentions. In the coming week, Euro Zone\u2019s forward looking Sentix index for October may be closely watched as well as Germany\u2019s industrial orders and output for August, yet other than that, fundamentals including ECB\u2019s monetary policy may be the key drivers for the single currency.<\/p>\n\n\n\n Analyst\u2019s opinion (EUR)<\/em><\/p>\n\n\n\n \u201cIn the coming week we may see fundamentals including ECB\u2019s monetary policy as the key drivers for EUR\u2019s direction. On the one hand the ECB\u2019s current intentions to keep its monetary policy steady tends to provide support for the EUR, while the uncertainty and the tensions in the EU-Russian relationships tend to weigh on the EUR.\u201d<\/em><\/p>\n\n\n\n The Aussie on a monetary level got some support as RBA remained on hold as was widely expected, keeping rates unchanged at 3.6%. In its accompanying statement the bank seemed to be leaning more towards the hawkish side by noting that financial conditions have eased and that the full effect of earlier rate cuts will take some time to be shown. Overall should this hawkish turn in RBA\u2019s direction be intensified we may see the Aussie getting additional support. Yet we also note that the bank in its financial stability review seemed worried about global financial stability while also finds that Australian households, businesses and banks are well placed to weather most shocks. On a macroeconomic level, news are not so good as the building approvals displayed a wide contraction for August while the trading surplus for the same month narrowed, implying that Australia has gained less from its international trading activities. In the coming week, we note the release of Australia\u2019s consumer sentiment for October. On a fundamental level we expect the Aussie to be affected by the market sentiment in the sense that as a commodity currency it\u2019s considered a riskier asset in the FX market, hence an improvement of the market sentiment could provide some support for AUD and vice versa. Also the US- Sino relationships could play a role for AUD\u2019s direction given the close Sino-Australian economic ties. An improvement of the US-Sino relationships given the ongoing negotiations between the two super economies, could provide support for AUD and the contrary a deterioration of their relationships could weigh on the Aussie.<\/p>\n\n\n\n Analyst\u2019s opinion (AUD)<\/em><\/p>\n\n\n\n \u201cIt is our view that the RBA\u2019s monetary policy stance is at a \u2018good\u2019\u2019 place currently and thus we wouldn\u2019t be surprised to see some pushback from policymakers if asked about a possible rate cut in the near future. Moreover, the monthly acceleration of inflation in the economy may dampen hopes that the RBA could cut in their next meeting.\u201d<\/em><\/p>\n\n\n\n In the coming week we highlight the release of Canada\u2019s September employment data next Friday. The release of Canada\u2019s August employment data was a disappointment for Loonie traders as the unemployment rate rose to 7.1% if compared to July\u2019s 6.9% while the employment change figure dropped deep into the negatives reaching as low as – 65.5k. The data highlighted the weakness of the Canadian employment market enhancing also the market\u2019s dovish expectations for BoC\u2019s intentions. Should the actual data imply a tightening Canadian employment market we may see the Loonie getting some support and vice versa. On a monetary level, the market\u2019s expectations for the bank to cut rates once more before the year ends tends to weigh on the Loonie. It should be note that the Bank\u2019s decisiveness to ease its monetary policy was underscored by the release of its deliberations for the last interest rate decision. Hence we see BoC\u2019s intentions as a factor primarily weighing on the Loonie. On a fundamental level the market sentiment could also play a role in the path of the CAD with a possible improvement supporting it given the CAD\u2019s status as a commodity currency. On the flip side the sinking of oil prices over the past week tends to weigh on the CAD as well as Canada is a major oil producer.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2025\/10\/image-16.png\")
<\/figure>\n\n\n\nGBP \u2013 Worries for UK Government\u2019s fiscal plans<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/10\/image-17.png\")
<\/figure>\n\n\n\nJPY \u2013 BoJ\u2019s intentions could support the Yen<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/10\/image-18.png\")
<\/figure>\n\n\n\nEUR \u2013 Conflicting fundamentals for the common currency<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/10\/image-19.png\")
<\/figure>\n\n\n\nAUD \u2013 RBA remained on hold with a hawkish tilt<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/10\/image-20.png\")
<\/figure>\n\n\n\nCAD \u2013 September\u2019s employment data to move the Loonie<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/10\/image-21.png\")
<\/figure>\n\n\n\n