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25.10.202309:50 Forex Analysis & Reviews: Uncertainty over the situation in the Middle East fans market volatility

Continuation of diplomatic efforts aimed at preventing the previously announced Israeli military operation in Gaza calmed down the global financial markets. However, a new downturn may occur if the calls for the Israeli army to refrain from entering Gaza remain ignored.

Efforts to resolve the conflict in the Middle East already impacted oil and gold prices, but the lack of a clear and definite understanding of whether the conflict will further escalate prevents them from falling significantly.

In the stock markets, all attention shifted to the results of corporate earnings reports, while the forex market continues to be primarily focused on the prospect of further interest rate hikes by the Fed. Interestingly, this possibility continues to be criticized in the investment community due to the risk of negative consequences for the US and global economy.

On a different note, the recently-released consumer inflation report in Australia, which showed a larger-than-expected increase, rekindled the discussion about whether the Reserve Bank of Australia will raise interest rates in the future. According to the data, on a quarterly basis, it rose to 1.2% from 0.8%, while on a year-on-year basis, it decreased slightly less than expected, to 5.2% from 5.0% instead of 5.9%.

Overall, looking at the big picture in the forex market, much will depend on the actions of the Federal Reserve since it significantly influences other central banks with their monetary policy actions. Of course, the situation in the Middle East will also be a factor, as well as the upcoming labor market data from the US. Expect markets to remain highly volatile and, in general, move within narrow ranges.

Forecasts for today:

Exchange Rates 25.10.2023 analysis

Exchange Rates 25.10.2023 analysis

EUR/USD

The pair currently experiences a weak upward correction, following yesterday's decline. It may attempt to recover on the back of local demand for risk assets and expectations of the ECB tightening requirements for bank reserves. Additionally, a notable reduction in expectations for further interest rate hikes by the Fed and the upcoming ECB meeting could prompt a rise to 1.0695 after a drop to 1.0570.

GBP/USD

The pair remains under pressure amid the uncertainty in the Middle East and internal economic issues in the UK. Perhaps, after the breakdown of 1.2150, it will continue to decline to 1.2115 and then to 1.2050.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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