The ECB is holding firm on its “Goldilocks” outlook, expecting U.S. tariff effects to fade quickly with Germany’s fiscal stimulus, backing unchanged rates at the October 30 meeting, while Lagarde likely stresses policy is “in a good place”—signaling inflation is largely tamed and cuts are off the table—despite underlying trade and geopolitical risks; stable inflation expectations (1-year at 2.7%, 3-year at 2.5%) reinforce this steady stance. The ECB-Fed rate gap, hopes for U.S.-China trade de-escalation after a Trump-Xi meeting, and France’s political compromise on corporate tax hikes to trim its deficit are all boosting the euro. However, November’s GfK Consumer Confidence unexpectedly fell to -24.1 (from a revised -22.5 prior, worse than -22.0 forecast) on job security fears, signaling private consumption recovery will stay weak despite a slight uptick in purchase willingness.

The USDJPY rally stalled near the key October 10 high of 153.27 as traders grew cautious ahead of the Fed’s expected 25bps rate cuts this meeting and in December, contrasted with the BoJ likely holding rates but possibly signaling a hawkish tilt, prompting profit-taking; concerns from Japan’s Economics Minister about FX volatility and US Treasury Secretary Bessent’s calls for BoJ flexibility to curb yen weakness fueled intervention speculation, while failure to break 153.27 could trigger CTA liquidations. Longer-term, markets may underestimate potential BoJ hikes amid robust inflation and wage growth, with Governor Ueda possibly hinting hawkishly and a Takaichi regime prioritizing fiscal discipline over unchecked stimulus despite coalition pressures. This week’s US-China trade optimism post-APEC could briefly weigh on the yen by boosting risk sentiment, but deeper unresolved tensions suggest limited aggressive yen recovery.

The Australian Dollar is trading with an upside bias, fueled by positive risk-on sentiment and optimism for a “win-win” outcome in upcoming US-China presidential talks, supporting trade-sensitive currencies. RBA Governor Bullock’s cautious, hawkish comments—highlighting sticky inflation, a shallower easing path than peers, and the need to balance jobs and prices—boosted the pair further, with markets expecting a rate pause. Today’s hotter-than-expected Q3 inflation data (1.3% QoQ, 3.2% YoY, core at 3.0%) pushed annual CPI to 3.5%, above the RBA’s target and ruling out near-term cuts. If the Fed delivers dovish guidance on Wednesday, AUDUSD bulls could see a third boost, targeting a retest of the September 30 high.