The US dollar is showing a mixed performance against major currencies. It is little changed versus the euro, up 0.09%, and slightly lower against the British pound by 0.09%. However, the dollar has gained 0.27% against the Japanese yen despite market expectations for another Bank of Japan (BOJ) rate hike driven by the yen’s weakness.
A technical analysis of the key pairs EURUSD, USDJPY, and GBPUSD reveals some interesting moves. The British pound initially strengthened against the dollar following an early release of the UK Office for Budget Responsibility’s (OBR) full fiscal outlook but soon reversed sharply.
In an unusual early publication due to a technical issue, the OBR outlined the UK government’s fiscal projections ahead of the upcoming Budget. The forecast shows a government surplus of £21.7 billion by 2029–30, more than double the £9.9 billion projected in March. The expected Budget will be tax-heavy, featuring a three-year extension of frozen personal tax thresholds, raising £8 billion, higher dividend, property, and savings taxes adding £2.1 billion, and new National Insurance Contributions (NICs) on salary-sacrifice pensions estimated to raise £4.7 billion. Overall, personal tax receipts are expected to increase by £14.9 billion.
Additional tax measures include a new property tax on homes valued over £2 million, new taxes on electric and plug-in hybrid vehicles starting April 2028 generating £1.4 billion, and gambling tax reforms contributing £1.1 billion. Despite the increased tax revenue, government spending is still forecast to rise each year, reaching £11 billion more by 2029–30. The OBR describes this package as the third-largest medium-term tax increase since 2010.
The OBR also now estimates a 59% chance of meeting fiscal targets, up from 54%. It upgraded UK GDP growth forecast for 2025 to 1.5% but trimmed 2026 growth to 1.4%. Inflation is expected to be 3.5% next year, easing back to 2% by 2027, while government debt is projected to stabilise around 95–96% of GDP.
Market reaction to the premature release was volatile: GBPUSD briefly surged above 1.3200 before falling to 1.3136. UK 10-year bond yields rose from 4.43% to 4.53%. The incident caused political embarrassment and suggests this could be Chancellor Jeremy Reeves’ final Budget.
Meanwhile, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 25 basis points to 2.25%, with a 5-1 vote in favour. The central bank highlighted that while annual consumer inflation rose to 3% in the September quarter, significant economic spare capacity should help bring inflation down toward the 2% target by mid-2026.
Economic activity, which was weak mid-year, is beginning to recover, supported by lower interest rates that bolster household spending and stabilising labour markets. The RBNZ indicated that future OCR decisions will depend on inflation trends and economic conditions. Additional cuts may support confidence and offset the risk of a slower recovery. The committee weighed holding rates steady at 2.50% but chose to cut, acknowledging the extent of excess capacity.
The updated RBNZ projections see OCR at 2.25% in March 2026 (down from 2.55%) and 2.28% in December 2026 (down from 2.62%). Following the cut, NZDUSD jumped 0.87%, becoming the day’s strongest mover against the dollar. However, the pair encountered resistance near the 50% retracement level of the recent downswing, around 0.568–0.569.
In Japan, a Reuters report indicates the BOJ is preparing markets for a possible rate hike as soon as December. The central bank is adopting a more hawkish stance amid concerns that the weak yen could fuel inflation. BOJ officials have intensified messaging to remind markets a rate increase is possible, especially after a meeting between Prime Minister Sanae Takaichi and Governor Kazuo Ueda appeared to ease political opposition to tightening.
Several board members now consider conditions favourable for a hike, and Governor Ueda acknowledged that the feasibility and timing of a rate rise will be discussed in coming meetings. The decision between December and January remains close and may depend on the Fed’s meeting a week earlier. The BOJ increasingly views the yen’s prolonged weakness as an inflation risk, reducing reasons to delay policy normalisation.
Australia’s October Consumer Price Index (CPI) data came in hotter than expected, signalling renewed inflationary pressures and effectively ruling out near-term Reserve Bank of Australia (RBA) rate cuts. Headline inflation was flat month-on-month at 0.0% versus an expected decline of 0.2%, with annual inflation rising to 3.8% compared to expectations of 3.6%, moving further above the RBA’s 2–3% target band.
Core inflation was even more concerning: the trimmed mean rose to 3.3% year-on-year (expected 2.9%) and increased 0.3% month-on-month, while the weighted median hit 3.4% year-on-year (expected 2.95%). This data strongly supports the RBA’s ‘higher-for-longer’ interest rate stance.
October’s CPI release also marks the transition to the Monthly CPI as Australia’s primary inflation measure, providing quicker insights and more detailed data for policy decisions. The AUDUSD responded positively, rising around 0.42% at the start of the US session.
In US markets, stock indices are trading higher at the open, led by the NASDAQ. The Dow Jones Industrial Average is up 30 points, the S&P 500 has gained 14.37 points, and the NASDAQ is ahead by 96 points.
US Treasury yields are modestly higher across the curve: the 2-year yield is at 3.471% (+1.2 basis points), 5-year at 3.572% (+0.7 basis points), 10-year at 4.007% (+0.6 basis points), and 30-year at 4.659% (+0.2 basis points).
Commodities are mixed. Crude oil is down $0.13 at $57.80 per barrel, gold has risen $32 to $4,163, silver is up $0.94 at $52.39, and Bitcoin is down $719 to $86,612.
Original Source: Greg Michalowski of investinglive.com
