Core Viewpoint - The U.S. dollar is under pressure, leading to gains in the euro and pound, as the Federal Reserve's recent rate cut and comments from Fed Chair Jerome Powell were perceived as less hawkish than expected, reinforcing dollar selling momentum [1][6]. Group 1: Currency Movements - The euro was steady at $1.1741 after a 0.37% rise, while the pound was firmer at $1.33955, both poised for their third consecutive week of gains [1]. - The dollar index, measuring the U.S. currency against six major rivals, was at 98.34, set for a weekly drop of 0.7% and down over 9% this year, on track for its steepest annual drop since 2017 [6]. - The Japanese yen is expected to gain slightly, trading at 155.61 per dollar, while the Australian dollar remained steady at $0.6667 and the New Zealand dollar was 0.14% firmer at $0.5815 [7][9]. Group 2: Federal Reserve and Monetary Policy - The Federal Reserve cut rates as expected, but the comments from Powell were seen as less hawkish, which may help avoid negative surprises for investors [2][6]. - There is uncertainty regarding the U.S. monetary policy path next year, with traders pricing in two rate cuts in 2026, while policymakers anticipate only one cut next year and one in 2027 [6]. - Economic data lagging from the recent federal government shutdown will influence future monetary policy decisions, with the upcoming midterm elections likely focusing on economic performance [6]. Group 3: Economic Outlook - The Swiss National Bank maintained its policy rate at 0% and noted that a recent agreement to reduce U.S. tariffs on Swiss goods has improved the economic outlook, despite inflation being below expectations [8][9]. - Concerns regarding the U.S. labor market are expected to drive the Federal Open Market Committee (FOMC) to consider further interest rate cuts next year [6].

Currency Market Overview - The dollar eased after the U.S. government shutdown ended, while the yen hit a record low against the euro due to Japan's new prime minister advocating for slow rate hikes [1][5] - The Australian dollar reached a two-week high following a significant drop in the unemployment rate, reducing the likelihood of further rate cuts [2] Economic Data Impact - Currency markets may experience volatility as a backlog of economic data is released after the government shutdown, although some key figures for October may not be published [3] - The resolution of the Congressional impasse has removed uncertainty and a major growth headwind for markets [4] Yen and Interest Rate Dynamics - The yen traded at 179.805 per euro before recovering slightly, and approached a low of 155.02 per dollar, indicating significant weakness [5] - Japanese officials expressed concerns over yen weakness, with Finance Minister warning about rapid movements in the foreign exchange market [6] - A weak yen could compel the Bank of Japan to consider rate hikes, with traders estimating a 22% chance of a quarter-point increase in December and 43% by January [6] - Economists suggest that the government's survival may depend on managing the exchange rate, indicating a potential acceptance of rate hikes by the Bank of Japan to mitigate yen weakness [7]

Group 1 - The British pound has experienced significant volatility this week due to concerns over the UK's fiscal situation and government control, leading to fluctuations in exchange rates [1] - As of the report, the pound is trading at 1.3434 against the dollar, marking three consecutive weeks of decline, while the euro is stable at 86.67 pence [1] - The yield on UK 30-year government bonds surged to its highest level since 1998, influenced by a global sell-off of long-term bonds [1] Group 2 - The rise in government bond yields typically supports the local currency; however, in this case, the increase is driven by inflation concerns rather than optimism about long-term economic growth, putting pressure on the pound [1] - The Bank of England's Governor Andrew Bailey indicated uncertainty regarding the pace of future interest rate cuts, following a reduction in August [1] - Market expectations for a rate cut in November have dropped significantly from 67% to 18%, suggesting that UK bond yields may remain elevated compared to other major economies [2] Group 3 - The UK currently has the highest borrowing costs among G7 economies, with a 10-year government bond yield of 4.74%, compared to 4.2% in the US and 1.6% in Japan [2] - UK Chancellor Rachel Reeves is under pressure to maintain fiscal stability and has committed to strict spending controls ahead of the autumn budget announcement on November 26 [2]

Group 1: Market Overview - The global foreign exchange market experienced significant volatility this week, influenced by trade negotiations, Federal Reserve interest rate decisions, global central bank policy dynamics, and geopolitical risks [1][6] - The focus of the market is on the progress of tariff negotiations, the direction of Federal Reserve policies, and the performance of global economic data, with geopolitical risks and trade policy uncertainties remaining key factors affecting market sentiment [6] Group 2: Dollar Performance - The US dollar index showed a fluctuating trend, opening around 99.8, reaching a high of 100.64, with an increase of approximately 1.03% [3] - Initially pressured by expectations that the Federal Reserve might maintain interest rates, the dollar rebounded after comments from Fed Chair Powell regarding inflation and trade policy, closing at 100.42 [3] - The dollar exhibited "bull-bear divergence," with investors remaining cautious due to the complexity of US economic data and global economic uncertainties [3] Group 3: Euro and Pound Performance - The euro experienced a volatile week, initially rising for two consecutive trading days before declining on Wednesday and Thursday, closing with a slight rebound at 1.12511 [3] - The euro is expected to face long-term resistance at 1.2150, with insufficient upward momentum, likely maintaining a narrow ascending channel in the short term [3] - The British pound weakened due to uncertainties surrounding the Bank of England's interest rate decision and economic data, closing around 1.3300 [3] Group 4: Safe-Haven and Commodity Currencies - Safe-haven currencies like the yen and Swiss franc performed poorly this week, with the USD/JPY pair showing a V-shaped trend as market risk aversion eased amid tariff negotiations [4] - Commodity currencies were mixed, with the Australian dollar weakening due to global economic growth concerns and commodity price fluctuations, while the Canadian dollar stabilized and rebounded due to rising oil prices [5] Group 5: Global Central Bank Dynamics - Several central banks maintained their policies this week, including the Federal Reserve and the Bank of Japan, which continued their accommodative stances [7] - The Norwegian central bank kept high interest rates to address rising inflation [7] - The Hong Kong Monetary Authority took actions to stabilize the Hong Kong dollar, emphasizing the importance of regional financial stability [6][7]