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The Bank of Japan (BoJ) board members decided to leave the short-term interest rate unchanged at 1.25% following the conclusion of its two-day monetary policy review meeting on Friday.

The decision aligned with the market expectations.

Summary of the BoJ’s Monetary Policy Statement

Board's core CPI fiscal 2026 median projection at 2.5% vs 2.5% in July. 

Underlying inflation has hit levels in line with price target. 

BOJ board member Takata dissented on rate decision. 

Board's core-core CPI fiscal 2027 median projection at 2.7% vs 2.6% in July. 

Core inflation likely to stay near levels consistent with price target.

Risk underlying inflation could exceed price target. 

Core inflation hits levels generally aligned with price target. 

Must monitor risk of inflation rising unexpectedly, causing negative effects on economy later. 

Risks to prices tilted toward upside. 

Will keep raising interest rates amid economic, price and financial condition changes. 

Will consider timing, pace of rate increases with focus on chances of economy, prices aligning with baseline scenario and risks. 

Set sales pace at about 860 billion yen annually on book value basis. 

Medium- to long-term inflation expectations near 2%. 

Crucial to anchor core inflation near 2% target. 

Companies’ conduct shifting more toward increasing wages, prices. 

Will implement monetary policy as needed to sustainably and stably meet inflation goal. 

Must prevent risk of inflation rising above target from materialising, exerting negative impact on economy later. 

Risks to economic activity remain broadly balanced. 

Real interest rates have risen recently but short-term rates stay low. 

Interest rate burden is sufficiently low for firms compared to profits. 

Demand for corporate funds is rising. 

Financial institutions' lending stance stays active. 

Middle East conflict, growth in AI demand, FX volatility and their economic, price impact warrant attention. 

Unlike past focus on downside price risks, Japan now faces risk of inflation overshoot. 

No major distortions observed in Japan's financial activity. 

Long-term inflation expectations hover near 2%.

To speed up sales of ETF holdings to about 860 billion yen from previous about 330 billion yen. 

Underlying inflation likely to stay at levels aligned with Bank of Japan target. 

Proposed tax cut would reduce core CPI by 1.3 percentage points in fiscal 2027. 

BoJ Report on Risks

Vigilance remains necessary over impact of higher crude oil procurement costs on economy and prices.

Price pass-through in B2B transactions from high crude oil costs, AI-driven demand, forex likely to push consumer prices higher. 

If AI earnings don’t grow with investment, adjustment pressure could occur alongside asset price shifts. 

Recent surge in grain prices amid geopolitical tensions in Middle East and global weather conditions warrants attention as potential concern. 

Insufficient labor-to-capital substitution amid shortages may curb growth rate. 

Market reaction to the BoJ policy announcements

The Japanese Yen (JPY) attracts some buyers following the Bank of Japan’s rate hike decision. At the press time, the USD/JPY pair is down 0.20% on the day to trade at 157.40. 

This section below was published on October 29 at 22:00 GMT as a preview of the Bank of Japan Interest Rate Decision.

• The BoJ is expected to hold interest rates steady at 1.25% on Friday.
• The interest of investors will be on the BoJ’s future rate path..
• USD/JPY has been consolidating within 156-159 for the last six weeks.

The Bank of Japan (BoJ) is set to announce its monetary policy decision on Friday at around 02:30 GMT.

Like the Federal Reserve (Fed), financial markets are confident that the BoJ will leave interest rates unchanged, after raising them by 25 basis points (bps) to 1.25% in the September policy meeting. This is the highest interest rate level seen in 31 years in Japan. So far this year, the BoJ has delivered two quarter-to-a-percent interest rate hikes.

Commerzbank said in a note that markets anticipate “the overnight rate remaining steady, and none of the economists surveyed by Bloomberg expects a hike on Friday”. This consensus view leaves investors focusing more on the monetary policy statement, the central bank’s outlook report and Governor Kazuo Ueda’s press conference for the policy outlook into year-end.

Ueda leaned hawkish as AI demand and inflation near BoJ goals

BoJ Governor Ueda’s remarks after the September policy meeting have shown his concern about energy-driven inflationary risks. Ueda has also stressed the importance of anchoring core inflation near the 2% target. He has reiterated several times that the central bank will remain on the monetary tightening path.

Ueda’s speech on October 16 was scored at 8.2/10 versus by FXStreet’s Speechtracker, signaling a modest hawkish tilt compared to Ueda’s average 7.5 score. Ueda stressed that underlying inflation is “quite close” to 2% and that economic and price moves are roughly in line with forecasts. The commitment to “continue to raise interest rates” while financial conditions remain accommodative, and the plan to discuss whether to tweak the assessment of inflation approaching 2%, reinforced a gradual normalization bias that supports a firmer Yen backdrop.

Ueda’s remark that there is “no big gap” between the Bank of Japan’s view on AI-driven inflationary pressure and that of global policymakers, alongside noting some counterparts are more bullish on AI demand, underscores upside risks to prices that justify keeping a tightening path on the table. By explicitly tying the timing and pace of future rate hikes to FX, AI demand and Middle East developments, the speech framed a data- and risk-sensitive reaction function that is incrementally supportive for the Japanese Yen, especially if AI-related demand and external shocks sustain inflation around the 2% target.

These comments suggest that BoJ’s Ueda will remain hawkish on the monetary policy outlook and will highlight the importance of keeping price pressures anchored near the central bank’s 2% target.

What are expectations for December’s policy meeting?

According to the October 13-19 Reuters’ poll, nearly 70% of economists, 54 of 78, ​expected the BoJ to raise its policy rate to 1.5% this quarter, almost double the share in the previous poll, Reuters reported. The consensus is for another hike before the year end.

How can USD/JPY react to the BoJ’s decision?

The BoJ’s interest rate decision itself appears to be a non-event for the USD/JPY pair, given that market participants are highly confident about policy rates remaining steady. What will be impactful would be the tone in the BoJ’s monetary policy outlook and any cues on where they see the terminal rate.

Any indication from the BoJ that it could approach the terminal rate faster would be favorable for the Japanese Yen (JPY). On the contrary, signs from the Japanese central bank that it would pursue a gradual monetary tightening path could have little impact on the Japanese currency. Therefore, risks are moderately tilted to the downside for USD/JPY.

USD/JPY Technical Outlook: Trading within range, volatility contracted

Trend: At the time of writing, USD/JPY trades at around 157.80. The USD/JPY pair has remained in a limited range between 156.08 and 159.04 for over a month. The 20-day exponential moving average (EMA) at 157.77 is flat-lined, reflecting that the overall trend is sideways.

Momentum: The Relative Strength Index (RSI) has been inside the 40.00-60.00 range for a month, indicating a sharp volatility contraction and reinforcing the current consolidation.

Support: On the downside ,the lower-end of the above-mentioned range at 156.08 is the immediate support. The pair would get exposed to the September 14 high at 155.00 if it fails to hold 156.08. 

Resistance: Looking up, the immediate hurdle for the pair is the upper-end of the consolidation near 159.04; a decisive break above that would increase the likelihood of further upside towards 160.00, followed by the September high near 160.40.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• USD/JPY attracts sellers for the second straight day amid a combination of negative factors.
• Hot Tokyo CPI and the BoJ’s hawkish outlook reaffirm December hike bets, boosting the JPY.
• Iran diplomacy hopes and falling US bond yields exert pressure on the USD and spot prices.

The USD/JPY pair drifts lower for the third straight day on Friday, sliding further below mid-157.00s during the Asian session following the highly anticipated Bank of Japan (BoJ) decision.

As was expected, the BoJ held its policy rate unchanged at 1.25% in an 8-1 vote, with Takata dissenting in favour of a hike. In the accompanying statement, the central bank noted that the core inflation is likely to stay near levels consistent with price target and risk to prices remain tilted toward upside. This comes on top of a hot Tokyo CPI report released earlier today and reaffirms market expectations for an imminent rate hike in December, providing a modest lift to the Japanese Yen (JPY) and weighing on the USD/JPY pair.

Meanwhile, the US Dollar (USD) selling remains unabated amid hopes for a diplomatic resolution to end the US-Iran war. Moreover, declining US bond yields narrow the US-Japan rate differential, lending additional support to the lower-yielding JPY and contributing to the offered tone surrounding the Greenback. This backs the case for a further depreciating move for the USD/JPY pair, though bears opt to wait for BoJ Governor Kazuo Ueda's comments during the post-meeting press conference before placing fresh bets.

• The British Pound has not faced a significant reaction against the Japanese Yen after BoJ’s policy decision.
• The BoJ leaves interest rates steady at 1.25%, with an 8-1 majority.
• Investors expect the BoE to hike interest rates to 4% next week.

The British Pound (GBP) remains almost stable against the Japanese Yen (JPY) at around 210.80 after the Bank of Japan’s (BoJ) monetary policy announcement.

The BoJ has left interest rates steady at 1.25%, with an 8-1 majority. BoJ board member Hajime Takata dissented the decision and voted in favor of a rate hike by 25 basis points (bps) to 1.50%.

In the September meeting, the BoJ hiked policy rates by 25 bps in the September meeting.

The BoJ was expected to leave policy rates unchanged as Governor Kazuo Ueda warned against quick monetary tightening in the September policy.

Analysts at Brown Brothers Harriman (BBH) said in a note that the BoJ is "widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again." They highlight Governor Kazuo Ueda’s cautious tone, recalling that "in September, BoJ Governor Kazuo Ueda warned that rapid rate hikes could unsettle asset prices, adding that it could take some time to confirm that 2% inflation is entrenched."

Meanwhile, investors await BoJ Governor Ueda’s press conference for fresh cues on the monetary policy outlook. Commerzbank said before the policy decision that “markets currently price an around 80% probability of a rate hike in December”.

On the United Kingdom (UK) front, financial markets shift their focus to the Bank of England’s (BoE) monetary policy announcement next week.

What to expect from BoE?

Strategists at Societe Generale argued that a BoE rate increase is effectively “nailed on in November,” pointing to a “brace of upside surprises for CPI and PPI output price inflation, and firmer wage data” as key drivers. They warn that this combination will “alert the MPC to the budding risk of second round effects” and “will almost certainly trigger a hawkish response on interest rates” at the next policy meeting on November 5.

• AUD/JPY holds losses as the Japanese Yen remains stronger following the BoJ policy decision.
• The BoJ decided to keep policy rate unchanged at 1.25%, as expected.
• AS of October 29, ASX futures indicated an 80% chance of an RBA rate hike to 4.85%.

AUD/JPY loses ground for the second consecutive day, trading around 110.80 during Asian hours on Friday. The currency cross holds losses as the Japanese Yen (JPY) remains stronger after the Bank of Japan (BoJ) board members decided to leave the short-term interest rate unchanged at 1.25% following the conclusion of its two-day monetary policy review meeting.

The downside of the AUD/JPY cross could be restrained as the Australian Dollar (AUD) receives support from expectations of further policy tightening by the Reserve Bank of Australia (RBA). Hotter-than-expected inflation data and hawkish comments from RBA officials have led markets to increasingly price in a rate hike at the central bank's upcoming November 3 meeting.

As of October 29, the ASX 30-day interbank cash rate futures November 2026 contract was trading at 95.22, signaling an 80% probability of an interest rate increase to 4.85% at the next RBA Board meeting.

RBA seen delivering one last hike as TD Securities flags firmer inflation

According to TD Securities, the firmer third-quarter CPI print has reinforced expectations that the RBA will move again next week. The bank now anticipates that the central bank will "lift the cash rate 25bps at next week's meeting to 4.85%," arguing that the stronger inflation outcome "validates the Bank's decision to hike last month" and that "likely forecast upgrades to the Bank's inflation track in the November Statement on Monetary Policy likely justify a follow-up 25bps hike next week." TD Securities adds that this "hike should mark the last in the cycle," suggesting the tightening phase is nearing its end.

• AUD/USD gains ground to near 0.7035 in Friday’s Asian session.
• Australia’s hotter-than-expected inflation and hawkish remarks from the RBA have boosted expectations of rate hike.
• Fed held steady on rates at the conclusion of its October meeting, maintaining its target range of 3.75% to 4.00%.

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar (AUD) edges higher against the US Dollar (USD) as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia (RBA) rate hikes.

The Australian Consumer Price Index (CPI) inflation rose to 4.3% YoY in September from 4.0% in August, the Australian Bureau of Statistics showed on Wednesday. This figure came in above the market consensus of 4.2%. RBA Governor Michele Bullock said that the price pressures the RBA had been worried about were starting to emerge.

This report has boosted the case for the RBA rate hike in the upcoming meeting next Tuesday and support the Aussie. Markets are now pricing in nearly a 80% chance of an interest rate increase to 4.85% at the next RBA Board meeting, up from 62% before the data was released, according to the ASX RBA Rate Tracker.

On Wednesday, the US Federal Reserve (Fed) decided to leave its benchmark federal funds rate unchanged in a range of 3.75% to 4%. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring to hike rates by 25 basis points (bps).

Policymakers stated that they hoped incoming data would help inform their next decision. Traders are pricing in a 74.9% probability of a hike in December, according to the CME FedWatch tool.

Australia inflation surprise bolsters RBA hike bets and supports the Aussie

Strategists at Brown Brothers Harriman note that the latest Australia inflation data “beat expectations, strengthening the case for another RBA hike and underpinning AUD.” September headline CPI rose “4.3% y/y (consensus: 4.2%) vs. 4.0% in August reflecting rising housing and transport costs,” leaving price pressures running hotter than the central bank had anticipated.

BBH highlights that “inflation is materially worse than the RBA assessed in August, when it forecast year-end headline CPI at 3.6% and trimmed mean at 3.3%.” In their view, “this argues for additional tightening,” with RBA cash rate futures having “raised odds of a 25bps hike to 4.85% on November 3 from 60% to 85%, and increased bets on another hike in Q1.”

On the core measures, BBH points out that “trimmed mean CPI matched consensus at 3.6% y/y up from 3.5% in August.” More importantly for policy, “the policy-relevant Q3 trimmed mean CPI ran hot at 3.7% y/y (consensus: 3.6%) vs. 3.6% in Q2,” reinforcing the view that underlying inflation remains uncomfortably elevated for the RBA.

Warsh doubles down on price stability pledge, keeping Dollar bulls engaged

Warsh’s press conference tone is firmly consistent with the established baseline, with the FXS Speechtracker score at 7/10 matching the historical average and underscoring a steady hawkish stance. The key remark that “ensuring price stability is not about a fixed date on a calendar” reinforces a data-dependent, outcome-focused approach, while repeated references to “new monetary medicine,” removal of accommodation, and confidence in inflation expectations signal ongoing commitment to quashing inflation rather than pre-committing to a rapid pivot. Emphasis on a hard 2% PCE target, rejection of a “soft” inflation goal, and acknowledgement that interest rates are tightening financial conditions and affecting new technology and CAPEX all support a narrative of persistent policy resolve that is broadly supportive for the Dollar.

The FXS Fed Sentiment Index jumped by +14.39 points to 141.89, pushing sentiment deeper into hawkish territory and aligning with the unchanged 7/10 FXS Speechtracker score. With the index far above the neutral 100 line, the combination of a firm 2% price stability pledge and recognition that “monetary medicine is starting to work” suggests markets should continue to price a relatively restrictive Fed path, a backdrop that tends to underpin the Dollar against the Euro and Yen.

Technical Analysis: AUD/USD keeps a modest bullish outlook in the near term

In the daily chart, AUD/USD holds a modest bullish bias as price sits above the 100-day simple moving average (SMA) and the Bollinger middle band, suggesting the recent rebound is supported by underlying demand. The Relative Strength Index (RSI) at 53.4 has shifted into neutral-to-positive territory, hinting that buyers retain the upper hand without yet pushing the pair into overbought conditions.

On the topside, immediate resistance is located at the upper Bollinger band around 0.7065, where a sustained break would open the door to a more extended recovery. On the downside, initial support is seen at the 100-day SMA at 0.7035, followed by the Bollinger middle band near 0.6995; a deeper pullback toward the lower Bollinger band at 0.6925 would likely attract fresh buying interest while keeping the broader constructive tone intact.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• DXY declines as easing Middle East tensions lower safe-haven demand and reduce December Fed rate-hike probabilities.
• US-Iran peace talks steady crude oil prices, helping dampen immediate inflation concerns.
• Robust US GDP and tight labor market data limit Dollar losses by demonstrating economic resilience.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground for the third successive day and trading near 101.70 during Asian hours on Friday.

The Greenback faces pressure on easing safe-haven demand amid hopes for US-led diplomatic peace talks. Easing Middle East tensions have helped offset oil supply and inflationary concerns, dampening expectations for a Federal Reserve (Fed) rate hike at its December meeting. CME FedWatch Tool suggests that traders are now pricing in a nearly 75% chance of a 25-basis-point rate increase, down from 84.2% a day prior.

Crude oil prices held steady following a Wall Street Journal report disclosing that US Vice President JD Vance reached out on Wednesday to Mohsen Rezaei, Secretary of Iran's Supreme National Security Council, in an effort to restart peace talks. US President Donald Trump confirmed he approved Vance's diplomatic outreach, adding that Iran needs assistance with medical supplies and other essential resources.

However, recent US economic data highlights continued resilience and increased Fed rate hike bets. Preliminary Gross Domestic Product printed at 3.4% YoY, beating expectations of 3.2% and rising from Q2's 2.2% reading, driven by strong consumer spending at 3.8% YoY.

Furthermore, the Fed’s preferred inflation metric, the Core PCE Price Index, rose 3.1% YoY in line with expectations, while initial jobless claims dipped slightly to 194K, reinforcing signs of a heating economy and a tight labor market.

Technical Analysis:

In the daily chart, Dollar Index Spot trades at 101.70. Price holds above the 50-day Exponential Moving Average (EMA) but remains capped by the nine-day EMA, keeping the near-term tone neutral after the recent pullback from the highs. The 14-day Relative Strength Index (RSI) has eased to 51.47, hinting at consolidative momentum rather than a clear directional push, while the FXS Fed Sentiment Index at 141.89 suggests elevated policy-related uncertainty that could limit sustained trending moves.

On the topside, immediate resistance is located at the 9-day EMA at 101.93, and a decisive break above this barrier would open the way for a retest of recent peaks. On the downside, initial support is seen at the 50-day EMA at 101.21, with a daily close below this level likely to shift the bias back toward a more bearish configuration as the index would start sliding beneath its medium-term trend base.

Treasury curve steepening seen as supportive for broader USD tone

Strategists at Scotiabank highlight that recent “price action in the Treasury curve was notable,” with Chair Warsh’s remarks ultimately delivering “a meaningful steepening in 2s-10s – a powerful signal for growth.” They describe the move as “a welcome move away from inversion,” stressing that it is one “that carries clear implications for the USD more broadly,” as investors reassess the growth outlook and the currency’s underlying support.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Silver attracts sellers for the third straight day and drops to a fresh YTD low on Friday.
• The bearish technical setup backs the case for an extension of the downward trend.
• The RSI is flashing oversold conditions, pointing to the risk of a corrective rebound.

Silver (XAG/USD) extends its descending trend for the third straight day, hitting a fresh low since November 2025 during the Asian session on Friday. The white metal, however, recovers slightly from the $51.00 neighborhood and currently trades near the $51.50-$51.55 region, still down around 1.25% for the day.

From a technical perspective, the decline witnessed over the past month or so has been along a downward parallel channel, which points to a well-established bearish trend. Moreover, momentum indicators hint that sellers have the upper hand despite the risk of short-term corrective bounces amid overstretched conditions.

In fact, the Relative Strength Index (RSI) at 27.21 sits in oversold territory, and the Moving Average Convergence Divergence (MACD) remains negative. Hence, any attempted recovery back above the $52.00 mark is likely to attract fresh sellers near the $52.50-$52.55 region, which, in turn, should cap the XAG/USD near $53.00.

A sustained strength beyond the latter could prompt some follow-through short-covering move, which should allow the white metal to surpass $54.00 and test the channel top near $54.52. This is followed by the 50-period SMA at $54.76. The XAG/USD would need to reclaim that to open the door to a more sustained recovery.

On the downside, a break below $51.00 would make the commodity vulnerable to accelerating the fall towards the $50.00 psychological mark and expose the lower boundary of the channel at $49.07, which forms a more meaningful floor. A sustained break beneath should pave the way toward deeper downside levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

XAG/USD 4-hour chart

• USD/CAD moved lower despite easing Middle East tensions pressuring oil and the Canadian Dollar.
• US Dollar struggles amid easing safe-haven demand due to Middle East tension relief.
• Strong US GDP and labor data limit deeper USD losses despite falling Fed hike probabilities.

USD/CAD loses ground for the third consecutive day, trading around 1.3970 during Asian hours on Friday. The pair depreciates despite renewed Middle East diplomatic efforts easing pressure on oil markets, placing downward pressure on the commodity-linked Canadian Dollar (CAD).

Crude oil prices held steady following a Wall Street Journal report disclosing that US Vice President JD Vance reached out on Wednesday to Mohsen Rezaei, Secretary of Iran's Supreme National Security Council, in an effort to restart peace talks. US President Donald Trump confirmed he approved Vance's diplomatic outreach, adding that Iran needs assistance with medical supplies and other essential resources.

The US Dollar (USD) faces pressure on easing safe-haven demand amid hopes for US-led diplomatic peace talks. Easing Middle East tensions have helped offset oil supply and inflationary concerns, dampening expectations for a Federal Reserve (Fed) rate hike at its December meeting. Traders are now pricing in a nearly 75% chance of a 25-basis-point rate increase, down from 84.2% a day prior.

However, recent US economic data highlights continued resilience and increased Fed rate hike bets. Preliminary Gross Domestic Product printed at 3.4% YoY, beating expectations of 3.2% and rising from Q2's 2.2% reading, driven by strong consumer spending at 3.8% YoY. Furthermore, the Fed’s preferred inflation metric, the Core PCE Price Index, rose 3.1% YoY in line with expectations, while initial jobless claims dipped slightly to 194K, reinforcing signs of a heating economy and a tight labor market.

Technical Analysis:

In the daily chart, USD/CAD trades at 1.3970, holding a bearish near-term bias as it remains below the nine- and 50-day Exponential Moving Averages (EMAs). The pair has retreated from recent highs and now trades under this short-term and medium-term moving average cluster, suggesting upside is capped for the moment, while the 14-day Relative Strength Index (RSI) at 36 leans toward weak momentum rather than outright oversold conditions.

On the topside, immediate resistance is located at the nine-day EMA at 1.4027, followed by the fifty-day EMA at 1.4057, with a more significant barrier at the horizontal level near 1.4300. On the downside, initial support appears at the 1.3732 horizontal floor, ahead of a deeper structural level at 1.3482, where buyers would be expected to show stronger interest if the current decline extends.

BoC hike seen as modestly hawkish, nudging rate expectations higher

Strategists at Scotiabank note that the Bank of Canada’s mid-week move was not only about the decision itself but also about the tone accompanying it. They highlight that the BoC’s hike on Wednesday was “delivered with a modestly hawkish message” which, in their view, “ultimately delivered a slight boost in rate expectations across the curve,” reinforcing support for the Canadian Dollar against its commodity peers.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• EUR/USD scales higher for the third straight day amid a combination of supporting factors.
• The ECB’s hawkish outlook acts as a tailwind for the Euro and spot prices amid a weak USD.
• Fed hike bets and geopolitical uncertainties could limit USD losses and cap gains for the pair.

The EUR/USD pair builds on the previous day's goodish rebound from the 1.1100 neighborhood, or a fresh low since May 2025, gaining positive traction for the third straight day on Friday. The momentum lifts spot prices further beyond the 1.1200 mark during the Asian session and is supported by a combination of factors.

The shared currency draws support from the European Central Bank's (ECB) hawkish outlook, signaling that a rate hike in December is firmly in play as inflation risks were on the rise from surging energy costs. The US Dollar (USD) is seen extending its retracement slide from a two-week high amid hopes for Middle East diplomacy and a slump in US bond yields, providing an additional boost to the EUR/USD pair.

In the latest developments, US Vice President JD Vance sent a direct letter to the secretary of Iran's Supreme National Security Council, Mohsen Rezaei, in an effort to restart peace negotiations. Furthermore, Qatari mediators presented Iran with a new draft deal to end the war with the US and Israel. However, investors remain wary amid escalating hostilities between Houthis in Yemen and Saudi Arabia.

Meanwhile, Iran's navy claimed Thursday that four oil tankers had struck sea mines in the Strait of Hormuz, adding to worries about supply disruptions in the Middle East. The uncertainty remains supportive of elevated crude oil prices, fueling inflationary concerns and bolstering hawkish US Federal Reserve (Fed) expectations. This could help limit USD losses and cap any meaningful gains for the EUR/USD pair.

According to CME Group's FedWatch Tool, traders are currently pricing in around a 75% chance that the US central bank will raise borrowing costs again in December. The bets were reaffirmed by Thursday's US macro data, which showed that economic growth accelerated to a 3.4% annualized pace during the July-September quarter and Inflation continued to run above the central bank's 2% target in September.

The aforementioned fundamental backdrop backs the case for the emergence of some USD dip-buying, making it prudent to wait for strong follow-through buying before confirming that the EUR/USD pair has formed a near-term bottom and positioning for further gains. Traders now look to the euro area's first estimate of third-quarter GDP growth and consumer inflation figures for short-term opportunities.

EUR/USD 4-hour chart

Technical Analysis

The EUR/USD pair stalls its recovery move near the 100-period Exponential Moving Average (EMA) on the 4-hour chart. The failure to reclaim this EMA suggests spot prices remain capped in the short term despite the recent repeated rebounds from the vicinity of the 1.1100 round figure. Hence, a sustained break above the 100-period EMA at 1.1211 would be needed to ease downside pressure and allow for a more constructive recovery phase.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Hawkish BoE expectations and rate-hike forecasts drive upside momentum for the British Pound.
• Easing safe-haven demand and Middle East tension relief weigh heavily on the US Dollar.
• Strong US GDP and labor data limit deeper USD losses despite falling Fed hike probabilities.

GBP/USD extends its gains for the third consecutive day, trading around 1.3400 during Asian hours on Friday. The pair appreciates as the British Pound (GBP) gains ground on hawkish sentiment surrounding the Bank of England’s (BoE) upcoming policy decision next week.

Traders expect the BoE to deliver a 25-basis-point rate hike in November, followed by another increase in February. Meanwhile, UK Finance Minister John Healey announced plans to raise rates on banks, gambling, savers, landlords, and online shopping, while also setting out measures to combat high energy prices.

Adding to the GBP/USD pair's upward momentum, the US Dollar (USD) faces pressure as easing safe-haven demand weighs on the greenback amid hopes for US-led diplomatic peace talks. Easing Middle East tensions have helped offset oil supply and inflationary concerns, dampening expectations for a Federal Reserve rate hike at its December meeting. Traders are now pricing in a nearly 75% chance of a 25-basis-point rate increase, down from 84.2% a day prior.

Despite the Dollar's recent headwinds, recent US economic data highlights continued resilience. Preliminary Gross Domestic Product printed at 3.4% YoY, beating expectations of 3.2% and rising from Q2's 2.2% reading, driven by strong consumer spending at 3.8% YoY. Furthermore, the Fed’s preferred inflation metric, the Core PCE Price Index, rose 3.1% YoY in line with expectations, while initial jobless claims dipped slightly to 194K, reinforcing signs of a heating economy and a tight labor market.

Warsh doubles down on price stability pledge, keeping Dollar bulls engaged

Warsh’s press conference tone is firmly hawkish, with the 7/10 FXS Speechtracker score in line relative to the historical average, but reinforced by repeated, uncompromising commitments to delivering 2% PCE price stability. The emphasis that “ensuring price stability is not about a fixed date on a calendar” and that “new monetary medicine” is working, alongside comfort with inflation expectations and tightening financial conditions, signals a data-dependent but resolutely anti-inflation stance that supports the Dollar. References to widening credit spreads, the impact of higher rates on technology and AI, and broadening capex suggest confidence that policy is biting without yet threatening the expansion, which keeps the Fed biased toward maintaining restrictive settings.

The FXS Fed Sentiment Index jumped by +14.39 points to 141.89, firmly in hawkish territory and well above the neutral 100 threshold, consistent with the strong anti-inflation messaging captured by the FXS Speechtracker. This elevated index level underscores that markets should interpret Warsh’s remarks as reinforcing a higher-for-longer rate narrative, a backdrop that is typically supportive for the Dollar versus the Euro and Yen.