Main narrative
Standing still can move markets. The Reserve Bank of New Zealand left rates unchanged and the kiwi tumbled. Canada raised rates and its currency finished as the week’s strongest among the majors covered here. Expectations made the difference.
Inflation remained the common problem, but central banks took different approaches. The Fed held rates at 3.75 – 4.00%, with two officials favouring an increase. Its communication offered less urgency about further tightening than dollar buyers had hoped for, and USD surrendered much of its earlier advance.
US growth remained firm at 3.4% annualised in the third quarter, while softer monthly income and spending complicated the picture. Core PCE inflation — the Fed’s preferred underlying inflation measure — stood at 3.1% annually. There was enough strength to keep further hikes in consideration, alongside reasons to proceed carefully.
By Friday, disappointing technology earnings and questions about the cost of AI investment had become the market’s immediate concern.
Market reaction
Friday’s selloff was substantial: the Nasdaq 100 fell 3.46% and the S&P 500 lost 1.83% that day. Energy and defensive sectors held up better as investors became more selective.
Oil rose into the weekend as Middle East supply risks remained unresolved. That supported Canada’s backdrop while adding to the inflation and growth challenges facing energy importers.
Gold also weakened. Geopolitical tension did not translate into reliable protection from the broader selling.
Currency strength
The weekly order was CAD, GBP, AUD, USD, CHF, JPY, EUR and NZD. Friday’s swings changed the finish, but did not erase the week’s bigger differences.
| Currency | The weekly story |
|---|---|
| CAD | The strongest performer. The Bank of Canada raised rates by a quarter-point to 2.50% and left further increases possible. Firmer oil added support, although weak monthly GDP remained a concern. |
| GBP | Finished second after a strong recovery. The Budget avoided a major confidence shock, while persistent inflation kept expectations of Bank of England tightening in focus. |
| AUD | Hotter inflation supported expectations of another RBA increase. The Aussie surrendered much of its midweek advance as shares weakened, yet still finished third over the full week. |
| USD | Retained a modest weekly gain after losing much of its pre-Fed strength. Resilient growth supported it; softer short-term yields limited the follow-through. |
| CHF | Finished higher over the week, helped by Thursday’s defensive demand, but gave back substantial ground on Friday. Its strength was uneven across the week. |
| JPY | Friday’s recovery reduced earlier losses. The BoJ held at 1.25%, with one member favouring a hike, while keeping further increases possible. The yen still finished weaker overall. |
| EUR | The ECB’s discussion of a possible hike and stronger euro-area GDP provided support, but failed to produce sustained leadership. Mixed inflation readings and expensive energy complicated the outlook. |
| NZD | The clear laggard. The RBNZ’s 4–3 vote to hold at 2.75% disappointed expectations of an increase. Guidance that further tightening remained likely could not undo the immediate setback. |
The lesson
A convincing domestic story is only part of a currency trade. The euro received relatively hawkish ECB commentary and still underperformed several peers. Australia’s inflation surprise supported the Aussie, but offered limited shelter during the equity selloff.
The useful question is whether new information improves one currency’s position relative to the other, and whether markets continue to reflect that improvement.
Forward implication
Canada and sterling carry the stronger recent performance into November, while New Zealand needs evidence that can rebuild confidence in further tightening. Australia’s policy advantage over New Zealand remains worth watching, with the RBA decision now an immediate test.
There is also a fresh complication: Saturday’s Chinese manufacturing survey fell to 49.3, below the 50 threshold separating expansion from contraction. Released after Friday’s trading, it adds a growth concern for the coming week, particularly for Australia.
What would change this view
A softer-than-expected RBA or BoE message would challenge policy support for AUD or GBP. Strong New Zealand employment data could help NZD recover some lost ground. A sustained fall in oil would remove part of Canada’s support, while further equity weakness could outweigh Australia’s interest-rate advantage.
Upcoming risk events (UTC)
- Monday, 2 November — 15:00: US ISM manufacturing survey; a fresh check on activity and prices.
- Tuesday, 3 November — 03:30: RBA decision. US midterm elections also bring political uncertainty, with results developing overnight.
- Tuesday, 3 November — 21:45: New Zealand employment report; an important test after the RBNZ’s pause.
- Wednesday, 4 November — 10:00 / 15:00: Euro-area inflation and US ISM services, respectively.
- Thursday, 5 November — 12:00: Bank of England decision and updated forecasts.
- Friday, 6 November — 13:30: US and Canadian employment reports; major tests for both policy outlooks.