This week, the focus of the foreign exchange market mainly revolves around the strong rebound of the US dollar, the downward correction of the Japanese yen, and signs of a rebound in the British pound. The market is paying attention to the upcoming US presidential election and the Federal Reserve policy meeting, which will have a significant impact on the trend of major currencies. Here is an overview of the important events and performance of major currencies in the foreign exchange market this week:

USD: Weak employment data and election uncertainty support the USD rebound.

On Friday, the USD against the EUR and other major currencies saw a rebound, partly due to the impact of hurricanes and strikes, with weak US labor market data. In October, the non-farm employment increased by only 0.012 million, far below the market expectation of 0.113 million, mainly due to the hurricanes and aviation manufacturing strikes. In late September, Hurricanes Helen and Milton hit the Southeastern United States and Florida, while strikes at Boeing and Textron further dragged down employment in the transportation equipment manufacturing sector in October.

However, despite the slowdown in job growth, the US unemployment rate remains at 4.1%. As a result, the market expects the Fed to cut interest rates by 25 basis points at the meeting on November 7. Futures trading linked to the Fed's policy currently shows a close to 99% probability of a rate cut. Investors are also closely watching the upcoming US presidential election on November 5. The impact of this election on the USD trend cannot be underestimated, with speculation of potential delays in announcing the election results leading to increased volatility in the foreign exchange market.

Analyst view

Uto Shinohara, Senior Investment Strategist at Mesirow in Chicago, said: "Following the release of weak employment data, the US dollar index rebounded across the board, with market focus shifting to the uncertainty surrounding the US presidential election." He pointed out that this uncertainty has exacerbated fluctuations in the foreign exchange market, especially against the backdrop of the upcoming Fed meeting.

Japanese Yen: Unchanged central bank policy triggers yen decline.

This week, the US dollar against the Japanese Yen rose for three consecutive days, reaching 152.94, ending the previous three-day decline. Bank of Japan Governor Haruhiko Kuroda announced to maintain the existing monetary policy after Thursday's policy meeting and made some less dovish remarks, briefly boosting the yen. However, due to investors' anticipation of possible adjustments in the Bank of Japan's policy in December, the market continues to be bearish on the yen's trend.

Analyst view

Economists Takeshi Yamaguchi and Masayuki Inui from Morgan Stanley MUFG stated in a report: "We believe that the likelihood of a rate hike in December has increased following Governor Kuroda's press conference." Their core expectation is that the Bank of Japan will raise rates to 0.5% in January and maintain a cautious stance on the yen's performance.

British Pound: Five-week decline ends, budget announcement causes volatility.

The British Pound ended the continuous five-week decline against the US Dollar, rising 0.26% to $1.29632 on Friday. The market's concerns about the UK's inflation picking up were triggered by the newly announced tax and spending budget by the UK government. Although Chancellor of the Exchequer Rachel Reeves announced the budget aiming to stimulate economic growth, investors are worried about the potential higher inflation risks it may bring.

The short-term borrowing costs of the British Pound recorded the largest weekly increase in over a year on Friday. This indicates that market concerns about UK inflation may affect the long-term trend of the British Pound.

Analyst view

Market analysts pointed out: "The British pound rebounded in the short term due to the stimulus of the budget, but the slowdown in the UK's economic growth and inflation pressures may suppress further gains in the British pound." Investors should pay attention to the regulatory measures the Bank of England may take in the coming weeks in response to the potential inflationary impact of the budget.

Euro: US dollar strength suppresses the euro

Against the backdrop of the US dollar rebound, the euro fell by 0.40% against the US dollar this week, closing at $1.084. Although the economic data in the eurozone is still performing well, the euro continues to face downward pressure from the strength of the US dollar. The market is taking a wait-and-see approach towards the future monetary policy direction of the European Central Bank, especially compared to the expectations of a rate cut by the Federal Reserve, the ECB's stance is more cautious.

Analyst view

Analysts generally believe: "The Euro's short-term gains may be limited as market expectations for a more stimulating Federal Reserve policy prevail." The pressure of a stronger US dollar will continue to constrain the euro, and investors need to continue monitoring the policy statements of the Federal Reserve and US economic data.

Canadian dollar: The impact of oil prices and the volatility brought by the economic differences between the US and Canada

This week, the performance of the Canadian dollar against the US dollar is influenced by the fluctuation of oil prices, and the performance of Canadian crude oil exports usually has a direct impact on the Canadian dollar exchange rate. However, due to the economic policy divergence between the United States and Canada, the Canadian dollar is under pressure, and it performs relatively weakly against the backdrop of a stronger US dollar.

Analyst view

Economists point out: "Although the rebound in Canadian oil prices provides some support for the Canadian dollar, the divergence from the US economy puts pressure on the Canadian dollar's trend." In the future, the performance of the Canadian dollar may be more affected by global oil price fluctuations and Canadian domestic economic data.

Summary

This week, the forex market presents a diverse situation with a rebound of the US dollar, a retracement of the Japanese yen, and a rebound of the British pound. Major currencies fluctuate due to weak US non-farm data, upcoming presidential elections, and the impact of various central bank policies. With the upcoming Fed policy meeting next week, investors should focus on the monetary policies of major economies and election results, which may continue to dominate the forex market trends next week.