Global markets pull assets into different directions due to monetary policy decisions and the Middle East conflict. The Fed raised its rate by 25 bps to 3.75%-4.00%. This was the first increase since 2023, as policymakers are seeking a way to tackle inflation, which is still above the target levels. 

However, expectations for the next immediate rate cut eased after US labor market and inflation data, leaving investors focusing on whether the central bank will take another step in the direction of monetary policy tightening or not.

The bond market is adding another layer of pressure. US Treasuries reached levels not seen in decades, and the dollar index managed to jump above 102. The combination of these factors supports the dollar even as expectations for an October rate hike have declined. The US services data for September shows that input-price pressures remain elevated, which means that inflation remains in the Fed’s focus.

When it comes to the situation in Europe, the problem goes beyond inflation and political risks. Eurozone inflation rose to 3.8% in September, while business activity expanded to its fastest pace. This keeps the next tightening by the ECB on the table. 

Energy is among the major external variables. The conflict between the US and Iran is far from being resolved. The G7 has agreed to release 100 million barrels from emergency reserves. This put pressure on WTI. 

EUR/USD: Fiscal Risk Overshadows ECB Tightening

The euro remains under pressure regardless of the current upside movement. The currency receives support from the expectations of the next ECB tightening. France is in the center of the pressure with rising government borrowing costs. Political uncertainty in Spain adds to the uncertainty. At the same time, the Eurozone inflation reached 3.8% in September, while the latest PMI shows better economic activity, which may prevent the European Central Bank from taking any further tightening actions in the near future.

From a technical perspective, traders can watch the following levels:

Buy: 1.1250 Targets: 1.1300 and 1.1330

Sell: 1.1230 Targets: 1.1200 and 1.1150

GBP/USD: Sterling Finds Support, but Energy Remains a Threat

The pound remains in a stronger position compared to the euro. Recent gains were supported by expectations of tighter UK monetary policy and a more constructive market view in Britain’s fiscal outlook. Currently, traders and investors are focused on the budget release, which may confirm strict budget discipline. The main risk for the UK’s economy remains inflation, which prevents the BoE from a more aggressive tightening. 

From a technical analysis perspective, traders can check the following levels for trading:

Buy: 1.3280 Targets: 1.3350 and 1.3400

Sell: 1.3250 Targets 1.3200 and 1.3100

WTI Crude: Supply Recovers, but the Risk Premium Survives

The oil market has changed significantly after September’s rally. WTI moved below $90 as exports from the Middle East recovered and the G7 is ready to release its reserves. Gulf crude exports recovered to 91%, which shows that producers found a way to export oil despite the conflict. However, oil still carries a geopolitical premium even as physical crude availability increases.

From a technical analysis perspective, traders can watch the following levels:

Buy: 90.00 Targets: 92.00 and 95.00

Sell: 89.00 Targets: 86.00 and 85.00

XAU/USD: High Yields Challenge Gold’s Safe-Haven Demand

Gold remains caught between two forces. On one side, a stronger US dollar and higher Treasury yields keep interest in bonds elevated. On the other hand, gold still benefits from structural demand. The near-term outlook will be heavily influenced by US monetary expectations. Stronger Fed tightening expectations would add to the yield headwind, and weaker US data could relieve the pressure from rates. Any new flare-up in the Middle East, meanwhile, would add to gold’s defensive appeal. For now, the precious metal is caught between restrictive financial conditions and a geopolitical backdrop that still calls for a considerable risk premium.

From a technical analysis perspective, traders can watch the following levels:

Buy 4,180 Targets: 4,200 and 4,240

Sell: 4,160 Targets: 4,120 and 4,100