Eurozone October inflation eased to 2.1% year-over-year from 2.2%, staying just above the ECB’s 2% target due to slower rises in food and goods prices, with core inflation steady at 2.4%. The ECB held interest rates unchanged for the third meeting, adopting a cautious, data-dependent approach amid trade uncertainties, while forecasts predict inflation dipping to 1.7% in 2026 before rising to 1.9% in 2027. Policymakers like Joachim Nagel see no need for changes yet, with a December review planned; meanwhile, markets expect less divergence between ECB and Fed rates after Powell’s comments, pressuring EURUSD but likely holding support at 1.1392 without new catalysts.

The yen remains under pressure and is the worst-performing G10 currency this year. However, we are seeing some demand for the yen on Tuesday after Tokyo’s October inflation rose to 2.8%, supporting gradual BOJ rate hikes, while Finance Minister Katayama’s concerns over sharp yen moves temporarily paused its decline. At the same time, upcoming LDP fiscal stimulus and skepticism toward PM Takaichi’s tax-revenue plans without rate hikes could further weaken the yen. Hedge funds are betting on USDJPY hitting 160 by year-end amid Fed-BOJ policy divergence and the BOJ’s cautious stance, with two major US investment houses ruling out near-term intervention. Thursday’s September wage data, with scheduled full-time pay expected at 2.5% YoY, will be closely watched for progress in the BOJ’s wage-inflation cycle.

The Reserve Bank of Australia kept its key interest rate steady at 3.60%, as expected, citing ongoing core inflation, strong consumer spending, and a rebounding housing market as reasons to avoid further rate cuts amid economic uncertainty. Recent data suggest inflation will remain elevated, giving little hint of future policy changes, especially after hotter-than-expected Q3 figures, making a December easing unlikely without clearer signs of cooling demand. With a US-China trade truce boosting global conditions, the Australian dollar may hold firm.