Forex Market Forecast for October 2024

With the US Federal Reserve decision behind us (they cut rates by 50 basis points), October will see a shift in focus towards other central banks and political matters, alongside economic data releases. Here’s what to watch:

• The European Central Bank (ECB) meets on October 17th. Will they maintain their current stance, or will the central bank cut rates again?
• The Bank of Japan (BoJ) holds its policy meeting on October 31st. Traders and analysts will be looking to see if the central bank raises rates again after holding steady in August and September.
• The US presidential election on November 5th looms large, and any political uncertainty could cause increased volatility in the markets.

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US Dollar (USD)

The Fed’s decision to cut interest rates in September was not a surprise, however, the size of the cut was unexpected for some. Even so, the focus now shifts to the upcoming US elections on November 5th. As the election race nears, we could see increased volatility in the US dollar in October as traders assess the economic impact of the forecasted winner. According to a Reuters poll of over 100 economists, most expect the Fed to cut by 25 basis points in November. October is typically a volatile month for the USD. Added to the upcoming election, we could see some swings in the USD.

Key Levels:

• EURUSD: Higher – 1.1275, Lower – 1.1010
• GBPUSD: Higher – 1.3600, Lower – 1.3180
• USDJPY: Higher – 149.25, Lower – 140.35

Euro (EUR)

The euro’s performance in October will depend heavily on the ECB’s monetary policy decision on October 17. However, according to a recent article from Reuters, “major brokerages, including Goldman Sachs and JPMorgan, now expect the European Central Bank to deliver a quarter-point cut.” This follows recent data that shows economic weakness and slowing inflation in the Eurozone. If the central bank maintains its current stance, the euro could hold its ground against the USD. However, another cut could see the current uptrend reverse.

Key Levels:

• EURUSD: Higher – 1.1275, Lower – 1.1010
• EURGBP: Higher – 0.8500, Lower – 0.8285

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British Pound (GBP)

We saw the GBP rise again in September, climbing above the 1.34 mark (as of September 27, it is trading at 1.3367). The current uptrend suggests it will push above that 1.34 level once again, but whether the bullish run can be sustained is another question. The BoE has been more careful in lowering rates, opting to maintain the current stance in September. However, analysts at ING recently said that “that could start to change” if signs of “lower wage/price expectations begin to show through in the official numbers.” They added that by the time of November’s meeting, and more so by December, “it will become clearer that rate cuts can pick up speed.” For traders, there could be some continued near-term bullishness, but it is prudent to be aware of the current macro factors coming into play.

Key Levels:

• EURGBP: Higher – 0.8500, Lower – 0.8285
• GBPUSD: Higher – 1.3600, Lower – 1.3180

Japanese Yen (JPY)

The BoJ’s monetary policy will be a critical event for the JPY in October, although the decision won’t arrive until the end of the month. The central bank kept rates steady again in September and signalled that there is no rush to raise again. Given that Japan has raised rates twice so far this year and others are cutting, we have seen some bullishness in the yen. Stefan Angrick, an associate director at Moody’s Analytics, told CNBC last week that the BoJ is expected to hike in October. If they do, the JPY strength could continue.

Key Levels:

• USDJPY: Higher – 149.25, Lower – 140.35
• EURJPY: Higher – 164.00, Lower – 155.90

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