FX Navigator (Nov): USD to consolidate near its highs

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We expect the USD Index (DXY) to consolidate near its recent highs over the next month, with risks tilted towards further gains rather than a material reversal. A fresh directional surprise is needed to break those highs, but none currently offers sufficient conviction. US economic resilience, a hawkish Federal Reserve, and challenges for other currencies should limit USD downside, without necessarily driving another leg higher.
• A pause needn’t undermine the USD if expectations of subsequent tightening remain intact. A surprise October hike would favour the currency, though we view this as unlikely. November’s mid-term elections offer no dependable historical currency pattern, while anticipated government gridlock limits the scope for surprises.
• The economy should provide a cushion, although uneven momentum argues against assuming renewed acceleration. September payrolls rose just 29,000, with unemployment at 4.2%, but the Atlanta Fed’s GDPNow estimate of 3.5% annualised Q3 GDP growth points to aggregate resilience rather than a downturn.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We expect EUR-USD to trade sideways over the coming month despite a challenging European backdrop. Relative monetary policy, emerging stagflation risks, and French fiscal tensions all lean against the EUR. Nevertheless, substantial speculative selling and the build-up of short positions suggest considerable pessimism is already embedded.
• Beyond a dominant USD (which we expect to be stable), rate differentials are the next key element. Market pricing shows c70bp of European Central Bank tightening and c80bp from the Fed over the next year. A more cautious ECB tone on energy-driven inflation, contrasted with a steady Fed, could weaken EUR-USD.
• French fiscal and political uncertainty adds another vulnerability. Budget negotiations over the coming weeks could test the government’s ability to deliver consolidation amid social unrest. Widening French-German bond spreads suggest investors are demanding greater compensation for that uncertainty. Further disruption, weaker fiscal credibility, or spillovers into broader European assets would be fresh negatives.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• EUR-GBP should trade sideways over the coming weeks.
• The pair faces downside risks from French fiscal uncertainty, although substantial negative news is already priced into the EUR. UK fiscal concerns appear manageable relative to France’s political and fiscal uncertainty.
• A fully priced BoE hike offers limited upside for GBP while any BoE pushback against a sequence of rate hikes is unlikely to be unique to the UK.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• GBP-USD should trade sideways over the coming weeks, with domestic downside risks unlikely to materialise immediately. GBP has outperformed most G10 currencies over the past month, suggesting its domestic vulnerabilities haven’t yet translated into renewed weakness. A directional move would therefore require a GBP-specific catalyst.
• The 28 October Budget remains a risk event, but the government appears focused on fiscal discipline and may defer major decisions to avoid unsettling markets. A disappointing statement or adverse gilt-market reaction could weigh on GBP, although this isn’t the central expectation.
• A Bank of England (BoE) hike on 5 November looks increasingly likely and largely priced in. The greater risk is if the BoE were to pushback pricing for a sequence of hikes, while high energy prices could squeeze household incomes; however, these risks may already be reflected in GBP.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We expect USD-JPY to remain range-bound over the coming month, consistent with our stable USD outlook. September’s brief fall towards 153 reversed as higher US yields and disappointment with the Bank of Japan (BoJ) restored the familiar 155-160 trading zone. Japanese policy progress and the FX intervention threat should restrain upside.
• The conditions for sustained JPY appreciation – positive real rates, fiscal credibility and broader domestic capital retention – remain incomplete. The BoJ will likely hold rates steady on 30 October, although it may raise its 2027 inflation forecast amid persistent oil-related pressures. A December hike is already largely priced in.
• Speculation about changes in Government Pension Investment Fund (GPIF) asset allocation remains a potential catalyst for the JPY. A shift towards domestic bonds at the expense of foreign assets could support the currency. The GPIF will announce its Q3 results on 6 November; the key question is whether it has increased its allocation to Japanese government bonds within the permitted range.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• EUR-JPY should remain range-bound over the coming weeks.
• The EUR faces an uncomfortable backdrop, but that doesn’t necessarily imply another sustained decline. A further fall would likely require genuinely new bad news, rather than a focus on familiar vulnerabilities.
• Japanese incremental policy progress and intervention risk should limit EUR-JPY upside. However, sustained JPY appreciation would require stronger real rates, fiscal credibility, and capital retention – none of which appears immediately likely.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We think USD-CHF will be on a sideways trend in the coming weeks.
• iven the CHF’s strong appreciation in recent weeks and potential for renewed FX intervention risk, we expect its recent ascent to pause at current levels, with the currency remaining broadly stable.
• We maintain our belief that carry pressure on the CHF is easing, as the EUR-CHF rates spread looks to be struggling to find another upward catalyst. This should limit further rates-driven pressure on the CHF.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We expect EUR-CHF to move sideways over the next month. The pair’s drivers have shifted from rate differentials towards fiscal differentials, reducing the influence of the rates-driven CHF weakness seen in recent months.
• Given the CHF’s recent strength, the Swiss CPI release on 3 November presents some event risk, particularly if EUR-CHF continues to move lower. A print meaningfully below September’s 1.0% y-o-y figure could prompt fresh FX intervention concerns.
• However, the Swiss National Bank (SNB) still appears to be staying on the sidelines of the FX market. Central-bank purchases were only CHF1.4bn in Q2 26, down from the previous quarter. Changes in total sight deposits also appear to be trendless, also indicating an inactive SNB. Nevertheless, the risk of intervention remains.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We expect USD-CAD to consolidate near its recent lows, with moves below 1.40 likely to prove short-lived. The CAD’s rally has benefited from fading demand for the USD as concerns about AI increased, allowing elevated oil prices to support the CAD rather than primarily reinforcing the USD’s safe-haven appeal.
• Relative interest rates offer little additional impetus. A Bank of Canada (BoC) hike on 28 October is almost fully priced, leaving subsequent guidance as the more important catalyst. This also creates asymmetric downside risks for the CAD if the BoC surprises by leaving policy unchanged.
• The BoC’s increased focus on inflation expectations and persistent energy-price pressures supports near-term tightening, but the hard data remain subdued. Employment has contracted, wage growth has slowed, and core inflation sits below target. We expect October and January hikes followed by a prolonged pause, rather than the roughly 100bp of tightening priced over the coming year.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We look for AUD-USD to move higher in the coming weeks. The broad USD trend continues to have weaker explanatory power over AUD-USD compared to earlier in 2026. This should give the AUD breathing room to focus on domestic factors, notably the 3 November Reserve Bank of Australia (RBA) meeting
• Markets have recalibrated pricing for that meeting after hawkish commentary from Deputy Governor Hauser which stated that the Australian inflation outlook appears to have deteriorated since the August meeting (Bloomberg, 21 October).
• Although that has prompted a rise in the implied rate for that meeting, markets have still stopped short of fully pricing a hike the RBA could make. We therefore believe that the AUD may be due another rates-driven boost.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We see AUD-NZD trading sideways in coming weeks.
• Given the scale of Cash Rate hikes in Australia so far this year, we expect the AUD to retain support from its relative yield differential advantage.
• A hawkish Reserve Bank of New Zealand should support the NZD ahead of its 28 October meeting, while the currency should face less pressure from Brent prices as this correlation has weakened.

Note: *Priced as at 15:13 HKT on 23 October 2026

Source: HSBC, Bloomberg

• We expect NZD-USD to move higher in the coming weeks. Unlike the AUD, the NZD is starting to be driven more by the broad USD again. Even so, a stable broad USD should allow NZD-USD to continue moving off the lows.
• Q3 CPI printed at 3.7% y-o-y, well above the upper band of the Reserve Bank of New Zealand (RBNZ)’s target range. RBNZ communication has remained hawkish in recent weeks, while the Official Cash Rate is below the top end of the range of “neutral” estimates. We see a hawkish RBNZ as a source of NZD support ahead of its 28 October meeting.
• NZD-USD positioning is heavily short, leaving it vulnerable to a short squeeze if the RBNZ adopts a hawkish stance on 28 October. We do not expect the New Zealand general election on 7 November to have a material impact on the NZD.

Dovish 

Dovish refers to an economic outlook which generally supports low interest rates as a means of encouraging growth within the economy.

Hawkish 

Hawkish is typically used to describe monetary policy which favours higher interest rates, and tighter monetary controls to keep inflation in check.

MoM / YoY 

Month on month / Year on year

PMI 

Purchasing Managers Index (PMI) is an indicator of economic health of the manufacturing sector (>50 represents expansion vs. the previous month).

IMM data 

International Monetary Market (IMM) is a division of the Chicago Mercantile Exchange (CME) that deals with the trading of currencies and interest rate futures and options and the IMM data is part of the Commitments of Traders (COT) reports published by the U.S. Commodity Futures Trading Commission (CFTC). The IMM data provides a breakdown of each Tuesday’s open futures positions on the IMM. Speculative positions are a trader’s non-commercial positions (i.e. not for hedging purposes).

G10  

G10 refers to the most heavily traded, liquid currencies in the world: USD, EUR, JPY, GBP, CHF, AUD, NZD, CAD, NOK, and SEK.

Fed / FOMC

Federal Reserve System (US’s Central Bank) / Federal Open Market Committee.

ECB 

European Central Bank (Eurozone’s Central Bank).

BoE 

Bank of England (UK’s Central Bank).

BoJ 

Bank of Japan (Japan’s Central Bank).

BoC 

Bank of Canada (Canada’s Central Bank).

RBA 

Reserve Bank of Australia (Australia’s Central Bank).

RBNZ 

Reserve Bank of New Zealand (New Zealand’s Central Bank).

SNB 

Swiss National Bank (Switzerland’s Central Bank).

Spot: Spot refers to the current market price of a currency pair that is important for immediate transactions.

50 dma: 50-day simple moving average number represents the average price of an index or a currency pair over the past 50 days.

Support (S), Resistance (R): Support and resistance are significant previous lows and highs plus retracement levels, based on historical price patterns of an index or a currency pair. Support is a historical price level where a downtrend of a currency pair paused due to demand for the first currency quoted in the pair increasing, while resistance is a historical price level where an uptrend of a currency pair reversed amid demand for the second currency quoted in the pair increasing.

HSBC Positioning Indices: The indicators have been devised to track the net position of momentum traders, looking at hundreds of strategies, operating over many different time horizons. It considers time horizons of 5 days up to 260 days. An indicator level of +10 would indicate that the hundreds of different strategies have all lined up and gone long (i.e., buy the first currency quoted in the pair). Similarly, an indicator level of -10 indicates that all strategies are short (i.e., sell the first currency quoted in the pair).
Tactical view where a currency pair is referenced (e.g. USD/JPY): An up (⬆) / down (⬇) / sideways (➔) arrow indicates that the first currency quoted in the pair is expected by HSBC Global Investment Research to appreciate/depreciate/track sideways against the second currency quoted over the coming weeks. For example, an up arrow against EUR/USD means that the EUR is expected to appreciate against the USD over the coming weeks.