Forex Today: Gold falls below $4,000 as US Dollar Index reaches new 19-month high

Key developments to watch on Wednesday, 11 November:

Hot inflation figures and hawkish remarks from Federal Reserve (Fed) policymakers continue to underpin the US Dollar Index's advance. On Thursday, the index is trading above 103.00, its strongest level since April 2025. Weekly Initial Jobless Claims and Existing Home Sales figures are due on the US economic calendar in the second half of the day, while investors will continue to scrutinise comments from central bank officials.

A repricing of the Fed's interest rate path is supporting the USD's outperformance against its peers this week. The CME FedWatch Tool now puts the market-implied probability of a cumulative 50 basis points (bps) increase in the policy rate over the next two meetings at nearly 62%, up from just 10% a week earlier. Following three successive daily increases, the benchmark 10-year US Treasury bond yield is steady at around 5% on Thursday. US stock index futures, however, remain lower despite Wednesday's gains.

Fed rate hike expectations rise as MUFG sees better risk-reward in 25bps move

Recent market developments have rekindled speculation about a stronger Fed policy response, MUFG/BTMU analysts note. Nevertheless, they “remain sceptical of the need to hike by 50bps at this stage and suspect the majority will see the better risk-reward in going by 25bps.” Highlighting the data still to come, they observe that “we still have another payrolls report (but no further CPI prints, although it’s the day after) before the FOMC meeting,” while warning that “a strong print plus a rebound in crude oil after the recent sharp drop would be one scenario of a possible more aggressive hike.”

Annual growth in UK Gross Domestic Product reached 1.9% in the third quarter, the Office for National Statistics reported earlier in the day. In line with market expectations, the figure marked an acceleration from 1.4% in the preceding quarter. Separate UK releases showed monthly gains of 0.3% in Industrial Production and 0.7% in Manufacturing Production for September, both exceeding analysts' forecasts. Following a decline of more than 1% over two days, GBP/USD is finding some support from the positive UK figures, limiting its losses, although it remains around 1.3250, its weakest level in nearly a month.

Bank of Japan (BoJ) board member Toichiro Asada warned on Thursday that, with consumption lacking momentum, the central bank must consider the risk that rate increases could depress underlying inflation. USD/JPY is maintaining its gains following Wednesday's rise of nearly 0.7%, trading near 160.00 at its strongest level since early September. Japanese figures released earlier in the day showed a monthly increase of 0.7% in the Producer Price Index in October, reversing September's reported decline of 0.2%.

The shift towards more hawkish Fed expectations continues to put substantial pressure on Gold. Down more than 2.5% since the start of the week, the precious metal is trading around $3,960 in Thursday's European session, a fresh weekly low.

EUR/USD remains under selling pressure below 1.1100, trading at its lowest level since May 2025.

AUD/USD is approaching 0.6800 as it falls for a third successive day on Thursday, whereas NZD/USD is hovering around 0.5500 following Wednesday's loss of about 0.8%.

USD/CAD is trading above 1.4250 during the European morning, taking its gain for the week to nearly 1%.