The USD smile reappeared: the dollar initially firmed as trade tensions with China spiked and risk appetite wobbled, but the rebound faded as hopes for a TACO outcome (Trump always chickens out) buoyed sentiment and an even more dovish Fed path eroded the USD’s rate premium. Fresh jitters from US regional bank loan issues briefly supported the safe-haven leg, yet the same headlines reinforced expectations of easier policy, knocking the dollar back down the smile. With French political risk receding and the Takaichi trade losing steam, focus swings to the US shutdown’s growth hit, another dollar headwind if it drags on. Near term, the greenback’s ability to rally on risk-off looks capped if stress also pulls rate expectations lower; watch headlines on regional banks and US–China trade, then next week’s CPI, PMIs, and University of Michigan sentiment for confirmation. Soft data that validate dovish pricing would leave the USD vulnerable, especially versus safe havens, while resilient prints would restore some support.

The loonie stays heavy despite last week’s stronger jobs print as revived geopolitical risk, softer oil, and a negative domestic headline, an automaker shifting production and CAPEX to the US, damped sentiment and ultimately pulled money-market odds for an October BoC cut back up after an initial paring. Near-term catalysts are mostly homegrown: Monday’s BoC Business Outlook Survey for a reality check on demand, pricing power, and investment plans; CPI on Tuesday, likely near ~2% y/y headline and ~3% core and thus easy to fade ahead of next year’s framework review; and Thursday’s retail sales, still too choppy to prove a consumer turn. Add the lingering wait for the Fall Budget and the US–Canada policy backdrop, and the balance argues for CAD stabilization attempts rather than a clean rebound, i.e., looking to base out, but only if business outlook doesn’t crack, CPI stays contained, and fiscal/trade headlines avoid fresh shocks.

The euro has steadied after a weak start to Q4, supported by a shift in focus away from French political risk, Lecornu’s government survived two no-confidence votes, toward US shutdown risks, by EUR/USD trading at a widening discount to the EUR-USD rate spread as US regional-bank jitters stoked dovish Fed expectations, and by growing hopes for a diplomatic track in Ukraine that could aid euro-area assets. Near term, euro direction will hinge on October Eurozone PMIs and a dense slate of ECB speakers, alongside headlines on Ukraine, movements in the rate differential, and gauges of French sovereign risk. Still, the 10-year OAT–Bund spread remains elevated and US rates markets already price an aggressively dovish Fed path, implying some EUR headwinds persist and many USD negatives are in the price. Bottom line: any euro recovery should be gradual and limited in scope.

Sterling remains under pressure as softer-than-expected UK labour data pulled forward BoE cut expectations and eroded the pound’s rate support, while global risk jitters from the US–China trade spat and fading political risk premia in France and Japan added relative drag versus EUR and JPY. Near term, direction hinges on September CPI and retail sales and the flash October PMIs: further downside surprises would validate the current dovish market path and keep GBP grounded, but with two additional BoE cuts already priced, a run of firmer prints could see the pound regain composure as rate differentials stabilize. Net: near-term bias soft, but incremental data strength should elicit a measured GBP bounce rather than fresh lows.

The yen has firmed as Japan’s politics reduced the odds of a high-pressure fiscal pivot: the LDP–Komeito coalition’s collapse after Sanae Takaichi’s 4 Oct leadership win dimmed prospects for aggressive spending or BoJ fiscal dominance, while recent BoJ remarks reiterated readiness to normalize if data cooperate and US–China trade tensions lifted risk aversion. Near term, JPY sensitivity is highest to coalition arithmetic ahead of the Lower House reopening on 21 Oct, signs of an LDP–Ishin alignment under Takaichi would be modestly JPY-negative, whereas momentum toward an opposition bloc would be JPY-supportive, plus September CPI and BoJ board member Hajime Takata’s speech, which could firm or fade market pricing for further policy normalization.

The franc stays bid, seeming to key off gold’s record run more than Europe’s easing political risk, with EUR/CHF pressing six-month lows and risk reversals sliding even as near-term threat perceptions fade. Given the euro’s outsized weight in trade-weighted measures, the SNB will watch this closely; the move has been orderly versus April’s chop, but FX remains central as harsher US trade policies bite and Bern has cut its 2025 growth view to 0.9%. Near term, Tuesday’s trade data should help quantify tariff effects on Swiss exports, while Thursday’s first-ever SNB minutes may offer color on the reaction function and tolerance for FX moves. Baseline: CHF resilience persists while global uncertainties and gold stay elevated, but strength should cool if risk appetite stabilizes and safe-haven demand ebbs.

CNY started the week with a policy tailwind: the PBOC set a year-strong fixing, signaling a preference for stability even as domestic data stay mixed, credit growth is solid, driven by enterprise/public lending, trade surprised to the upside, but deflation persists, keeping consumption in focus. Near term, yuan sentiment hinges on whether the fix remains firm, how much new credit feeds real activity, and the broader USD tone into upcoming Fed rhetoric. Base case is a tight range; a firmer fix plus continued trade resilience and a softer dollar could nudge USD/CNY a little lower, while deeper deflation or a USD rebound would risk slippage. Longer term, any pivot toward consumption-led fiscal support would be CNY-positive at the margin.

The rupee firmed sharply over two sessions on the back of heavy RBI dollar sales in spot and forwards, and even Friday’s dip was contained by ongoing support. Sentiment also drew a lift from the IMF’s upgraded growth outlook and from stronger reserve buffers, with gold’s share in reserves at a multi-decade high. Policy steps to deepen rupee usage in regional trade and financing add a marginal tailwind. Near-term direction hinges on the RBI’s intervention cadence, US–India tariff headlines, portfolio flow momentum, crude-import dollar demand, and the broader dollar/risk tone; barring a fresh shock on any of these fronts, INR should trade steadier with an asymmetric bias to hold gains when support is visible.

After peaking just shy of 0.93 on the cross, AUD/USD has eased as the latest US–China trade flare-up weighed more on AUD than NZD. Domestically, a modestly hawkish RBA tone, with minutes and speaker emphasis on sticky inflation, was overshadowed by a soft September labour print and a surprise rise in unemployment, pushing markets to price a higher chance of a November cut and prompting some AUD-long reduction. With Australia’s calendar thinning near term, AUD performance will hinge on broader risk tone and whether recent rate-cut repricing extends; absent fresh positive data, rallies likely stay tactical.

New Zealand dollar proved relatively steadier on the cross even as NZD/USD briefly dipped below 0.57. Focus turns to Q3 CPI, where a rise toward ~3% y/y is expected to mark a peak ahead of a gradual descent, unlikely to shift the RBNZ’s near-term path given easing has been driven more by activity weakness. Markets already price one additional cut to an OCR trough near 2.25%; with a new governor arriving 1 Dec but little case for further easing, confirmation of a peaking inflation profile alongside stabilising growth would support the view that the undervalued NZD is forming a base.

The peso starts the week steady near the mid-18.40s, underpinned by carry as Banxico signals caution on further easing while inflation remains sticky—keeping the policy floor supportive for MXN. Near-term direction hinges on Banxico commentary and prints that shape the path of cuts, headline risk around tariffs/trade, and the broader USD/risk tone; stronger US data or risk-off would lift USD/MXN, while sticky inflation or firmer local activity that delays cuts would help the peso. Flows matter: sustained foreign participation in local rates preserves carry appeal, but outflows would quickly erode it. Tactically, the 18.40–18.50 zone is the immediate pivot, clean breaks could invite momentum either way.