Forex News
- EUR/USD struggles to extend gains as hawkish Fed expectations support the US Dollar.
- The pair trades below key daily moving averages, suggesting sellers retain control.
- Momentum indicators show early signs of recovery, but a strong bullish reversal appears uncertain.
EUR/USD struggles to extend its gains on Friday as the US Dollar (USD) steadies after coming under heavy pressure on Thursday. At the time of writing, the pair trades around 1.1230, below an intraday high of 1.1269, but remains on track for its first weekly gain in six weeks.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.32% | -0.65% | -0.05% | -0.82% | 0.49% | -0.63% | -0.67% | |
| EUR | 0.32% | -0.25% | 0.27% | -0.46% | 0.81% | -0.27% | -0.30% | |
| GBP | 0.65% | 0.25% | 0.46% | -0.21% | 1.06% | -0.02% | -0.07% | |
| JPY | 0.05% | -0.27% | -0.46% | -0.63% | 0.65% | -0.56% | -0.50% | |
| CAD | 0.82% | 0.46% | 0.21% | 0.63% | 1.31% | 0.09% | 0.16% | |
| AUD | -0.49% | -0.81% | -1.06% | -0.65% | -1.31% | -1.07% | -1.09% | |
| NZD | 0.63% | 0.27% | 0.02% | 0.56% | -0.09% | 1.07% | -0.06% | |
| CHF | 0.67% | 0.30% | 0.07% | 0.50% | -0.16% | 1.09% | 0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Hawkish Federal Reserve (Fed) expectations keep a floor under the US Dollar after this week’s US inflation data reinforced expectations of another rate hike before year-end. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.90 after touching an intraday low of 101.58, its lowest level since October 1.
Meanwhile, expectations of further European Central Bank (ECB) rate hikes offer limited support to the Euro (EUR), as traders weigh risks to growth alongside France’s fiscal and political concerns.
Nordea turns more constructive on USD as EUR/USD overshoots 2027 target
Strategists at Nordea highlight that "EUR/USD reached our H1 2027 target of 1.12 faster than expected." In response to the quicker-than-anticipated move, they state that "we therefore lower our year-end EUR/USD forecast to 1.10 from 1.14" and now "expect EUR/USD to test 1.08 in H1 2027 before recovering to 1.14 in H2 2027 and 1.20 by end-2028." Nordea underlines that "our baseline remains a strong US economy and two further Fed hikes, with risks skewed to the upside," and concludes that "overall, we remain constructive on the USD relative to the EUR over the next six to nine months."
Technical analysis
On the daily chart, EUR/USD keeps a bearish near-term bias as the pair holds well beneath the 50-day and 100-day simple moving averages (SMAs) at 1.1469 and 1.1470, and the 200-day SMA at 1.1584. Price is also below a dense Fibonacci retracement cluster, with the 23.6% level at 1.1239 leaning as immediate overhead resistance. The Relative Strength Index (RSI) at 38 suggests the pair is recovering from oversold conditions, while the Moving Average Convergence Divergence (MACD) has just turned marginally positive, hinting at waning downside momentum rather than a clear bullish shift.
On the topside, initial resistance appears at the 23.6% Fibonacci retracement at 1.1239, followed by the 38.2% level at 1.1319 and the 50% retracement at 1.1383. Higher up, the 61.8% retracement at 1.1447 is reinforced by the 50-day and 100-day SMAs clustered around 1.1470, while the 78.6% level at 1.1538 and the 200-day SMA at 1.1584 guard the path toward the cycle high at 1.1654. On the downside, the main support remains the structural Fibonacci anchor near 1.1111, where a sustained break would likely extend the broader bearish phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Royal Bank of Canada economists Claire Fan and Abbey Xu assess upcoming Canadian inflation data and the Bank of Canada’s Q3 Business Outlook Survey ahead of the Oct. 28 policy decision. They highlight persistent energy-driven inflation versus a still-soft economy, and expect this contentious balance of risks to keep the Bank of Canada on hold through the rest of 2026.
BoC seen staying uncomfortably on hold
"Canadian inflation data and the Bank of Canada’s Q3 Business Outlook Survey on Monday will be watched closely for signs on whether inflation pressures from persistently elevated energy prices are broadening and permeating across the economy."
"These releases will serve as key inputs for the BoC’s next interest rate decision on Oct. 28, as policymakers are wary that high oil prices could spill beyond gasoline prices into non-energy components and/or feed into rising business and consumer inflation expectations."
"Inflation risks, however, must be balanced against a gradually improving economy that remains soft."
"Progress has been choppy—GDP growth is set to slow in the second half of 2026 from the stronger pace in Q2, jobs have declined consecutively in August and September, and the unemployment rate has plateaued around 6.5% over the last three months after falling in the prior year."
"For now, we continue to expect a somewhat contentious trade-off between inflation and growth risks to keep the BoC uncomfortably on hold through the rest of 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Nordea’s research team keeps its Federal Reserve outlook unchanged, expecting one more rate hike this year and another in 2027 as US inflation remains above the 2% target and growth stays strong. The bank argues that elevated long-term Treasury yields mainly reflect robust nominal GDP growth and heavy capital demand, and do not yet look particularly restrictive for the US economy.
Fed path steady with strong data
"Inflation is still clearly above target, and the September CPI shows it moving up, not down."
"Monetary policy still does not look restrictive enough for an economy in this shape."
"Against that backdrop, long-term yields above 5% are not particularly restrictive."
"We keep our Fed forecast unchanged. We still expect one more hike this year and another next year, with the risks tilted to the upside."
"All in all, our view is unchanged. A strong economy and above-target inflation still call for tighter policy. We expect one more hike this year and another next year. Higher long-term yields do not change that call. They mostly reflect the same strong economy that keeps the Fed hiking."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD struggles to extend its recovery as the US Dollar stabilises.
- Hot US inflation keeps markets leaning toward another Fed rate hike before year-end.
- Weak employment figures temper RBA rate-hike bets, although further tightening remains possible.
AUD/USD trims some of its earlier gains on Friday as hawkish Federal Reserve (Fed) expectations cushion the downside in the US Dollar (USD) and US Treasury yields following the previous day’s pullback. At the time of writing, the pair trades around 0.6941 after reaching an intraday high of 0.6967, remaining on track for a weekly decline.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.90 after touching an intraday low of 101.58, its lowest level in two weeks. Meanwhile, the benchmark 10-year US Treasury yield recovers toward 5.11% after falling to a three-week low near 5.04% on Thursday.
Treasury yields declined across the curve on Thursday, dragging the US Dollar away from the 18-month high of 102.94 reached earlier this week. The move came as concerns over AI valuations and debt-funded investments triggered a sell-off in equities and drove investors toward government bonds.
However, the Greenback finds some support as hotter-than-expected US inflation data and resilient consumer spending keep expectations tilted toward additional Fed rate hikes.
Despite the strong data, traders still expect the Fed to pause at its October 27-28 meeting. Expectations instead centre on December, with the CME FedWatch Tool showing roughly a 90% probability of a rate hike.
On the Australian side, Thursday’s weaker-than-expected labour market report tempered bets on another Reserve Bank of Australia (RBA) rate increase. Employment fell by 39.3K in September, compared with forecasts for a gain of 20K, while the Unemployment Rate stood at 4.7%.
The figures suggest that higher borrowing costs are weighing on hiring. Markets now expect the central bank to leave rates unchanged at its November 2-3 meeting after delivering four increases this year.
Still, September’s meeting minutes show that the RBA remains open to further tightening, with the Board prepared to raise rates again if needed to meet its inflation and employment goals.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Scotiabank analysts highlight that Bank of England Governor Bailey sees little evidence of second-round inflation effects and a more resilient UK economy, with markets still pricing a 25bp hike next month. Technically, GBP/USD has rebounded strongly from mid-week lows, forming a bullish weekly outside range and opening scope to retest the 1.3650–1.3675 area, with key resistance at 1.3435.
Pound recovery points to range highs
"BoE Governor Bailey remarked that there was little evidence yet of second-round inflation effects in the UK while noting that the UK economy was more resilient than expected. The comments had no impact on OIS, with swaps still all but fully committed to a 25bps rate hike early next month."
"Elsewhere, Chancellor Healey will reportedly increase the corporation tax bank surcharge from 3% to 8% as part of next week’s budget in a bid to shore up UK public finances."
"Bullish – Solid GBP gains from Wednesday’s post-US CPI low have driven Cable back to the mid-1.33 area. A clear, bullish reversal is forming on the weekly chart as a result (a major outside range week)."
"With recent price action basing around the low point of the sideways range in place since April, the pound’s rebound suggests gains may extend to retest the upper end of the range (1.3650/75) in the coming weeks. Initial, key resistance sits at 1.3435 (200-day MA)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
TD Securities’ economist Robert Both expects Canadian CPI to rise to 3.2% year-on-year in September, driven mainly by higher Energy and Gasoline prices, while core measures such as CPI-trim and median remain near 1.9%. The subdued core profile should limit Bank of Canada reaction, even as new inflation forecasts in the October MPR are upgraded for headline CPI.
Headline CPI lifts, core stays soft
"We look for CPI to firm 0.1pp to 3.2% y/y in September (+0.2% m/m) on another large contribution from energy. Core CPI not expected to show any material broadening of price pressures, with CPI-trim/median projected to edge lower to 1.9% y/y."
"The subdued performance for core CPI should contribute to a more balanced message from the BoC in October with limited passthrough from high oil prices."
"Headline CPI is set to push further above the target range with a 0.1pp increase to 3.2% y/y in September as prices rise by 0.2% m/m."
"Our forecast would see CPI-trim hold at 1.9% y/y in September, while the weighted median edges 0.1pp lower to 1.9%. That would bring CPI-trim/median back to their 2026 lows, even if 3m rates of core inflation at 2.7% paint a more hawkish picture."
"While the Bank has leaned on those 3m rates of core CPI in previous episodes where momentum has shifted quickly, we don't think that 2.7% meets the threshold for the BoC to respond, especially on the heels of renewed weakness in the labour market."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- DXY falls to its lowest since October 1 and is back under its pre-CPI level.
- Bets on an October hike fall to about 16% from near 28% on Thursday.
- No Fed official speaks from Saturday until the decision on October 28.
Fed Chair Warsh's last word before the quiet period was that he doesn't prejudge meetings, and the Dollar Index is lower on it, though the drop stalled near 101.60 twice. It fell from just above 102.00 to about 101.85 in one five-minute bar as he spoke, then slid to its lowest since October 1. A 0.7% rise in September industrial production, forecast at 0.4%, didn't lift it, and after a second stall as US stocks opened lower it's back where the first bar left it.
In Bangkok, Fed Chair Warsh said he'll judge October and December when he gets to them, and that the Fed is moving away from previewing decisions. Bets on an October 27-28 hike fell from near 28% to about 16% as he spoke, and the Dollar Index fell with them. That is where October was priced before Wednesday's Consumer Price Index (CPI), prejudged by everyone but the Fed.
He also welcomed most of the world raising rates at once, with no free riders, which for the Dollar Index is the other side hiking too. The European Central Bank (ECB), at 2.5% since September 10, is priced to hold on October 29 and hike in December like the Fed. The index gains when US rates rise faster than the ECB's, and the gap between 3.75%-4.00% and 2.5% is staying put.
On the calendar
Fed officials go silent from Saturday through the October 27-28 meeting, which leaves the data to move the October odds, with a December hike still priced near 90%. Friday's last US release is the monthly budget statement at 18:00 GMT.
Jobless claims land at 12:30 GMT on Thursday, October 22, forecast 200K after 199K. The October Purchasing Managers Index (PMI) surveys follow at 13:45 GMT on Friday, October 23, then Michigan consumer sentiment at 14:00 GMT, with one-year inflation expectations last at 4.7%. The expectations number is the inflation side of the December decision.
On the charts
Friday's low is under the 101.75 floor of the band the index held from October 5 until Wednesday's spike, and it has climbed back just inside. The index is on track for its first weekly loss since early September, with the 50-day Exponential Moving Average (EMA) near 100.90 about a point below. The bounce off the second low has pushed intraday momentum into overbought.
DXY 5-minute chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- USD/MXN advances 0.47% to 18.49 despite broader US Dollar weakness.
- US-Mexico trade negotiations face obstacles over automotive, steel and aluminum tariffs.
- December Fed hike odds reach 89% ahead of key Mexican economic data.
The Mexican Peso (MXN) losses ground against the Greenback on Friday amid broader US Dollar (USD) weakness, as Mexico’s economic docket is absent, leaving traders leaning into US dynamics. At the time of writing, USD/MXN trades at 18.49, up 0.47%, on track for the sixth consecutive weekly gain.
USD/MXN climbs toward 18.50 as stalled trade negotiations undermine Peso sentiment
Talks between the US and Mexico on a trade deal and tariff reductions have stalled, as the Wall Street Journal reported that Commerce Secretary Howard Lutnick is opposing reductions in 25% tariffs on Mexican autos and 50% levies on steel and aluminum.
Meanwhile, Mexico's deputy trade minister, Luis Rosendo Gutierrez, told the Journal that negotiations were making progress. A swift resolution on this matter would be positive for the Mexican Peso, bringing some stability with its largest trading partner.
In the US, Industrial Production in September rose 0.7% MoM, exceeding estimates of 0.4% and the prior month’s 0.1% expansion. Aside from this, the docket was scarce on Friday; traders are still digesting this week’s inflation data, which has increased the chances of a December rate hike by the Federal Reserve.
Earlier, Fed Chair Kevin Warsh discussed the global economy, the AI boom, and yields at the IMF meeting in Bangkok. On monetary policy, he said, “We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”
For the October meeting, the chances of a hike collapsed to 14%, down from above 50%, on the initial reaction to the US CPI, according to Prime Terminal. For the December meeting, the probability of a 25-basis-point increase is 89%.
Next week, Mexico’s economic docket will be busy with Retail Sales, the release of mid-month inflation, jobs data and the Economic Activity indicator, usually a prelude of GDP. In the US, the schedule will be light, featuring housing data, Initial Jobless Claims and Flash PMIs.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 18.4915, extending its advance well above the clustered simple moving averages around 17.4234 and the former downward trend-line resistance now turned support near 18.1200, which together suggest a bullish near-term bias. The pair is holding far from the horizontal floor at 16.8866, while the 14-period Relative Strength Index at 71.0 edges into overbought territory, hinting that upside momentum remains strong but increasingly stretched.
On the downside, immediate support emerges at the recent breakout area around 18.1200, followed by the grouped 50-, 100- and 200-day simple moving averages near 17.42, which reinforce the broader bullish structure if tested. A deeper pullback would expose the horizontal base at 16.89, but as long as price holds above these underlying demand levels, USD/MXN would likely remain supported on dips despite the overbought signal from momentum.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- GBP/USD surges 0.61%, clearing 1.3350 as Sterling bulls gain momentum.
- Warsh offers no rate guidance as October Fed hike odds fall to 15%.
- UK inflation data takes center stage as November BoE hike expectations strengthen.
The Pound Sterling (GBP) advances against the US Dollar (USD) on Friday after Federal Reserve (Fed) Chair Kevin Warsh didn’t provide forward guidance on interest rates, while expectations that the Bank of England (BoE) would hike rates in November supported GBP/USD, pushing it above 1.3350 and registering gains of over 0.61%.
GBP/USD rallies as Fed uncertainty contrasts with hawkish expectations on the BoE
Fed Chair Kevin Warsh talked about the global economy, the AI boom and yields at the IMF meeting in Bangkok. Regarding monetary policy, he said, “We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”
Even though this week’s US inflation data supported an interest rate hike, investors seem skeptical and now price in a 15% chance of a 25-basis-point increase at the October meeting, according to Prime Terminal.
On the data front, Industrial Production increased in September, up 0.7% MoM, exceeding estimates of 0.4% and the prior month’s 0.1% expansion.
BoE expected to raise rates in November
In the UK, Bank of England Governor Andrew Bailey said that signs of second-round inflation are “quite subdued.” He was surprised about the economy, adding that it turned out “to be more resilient than we expected to be.”
A Reuters survey showed that 54 of 63 economists expect the BoE to raise the Bank Rate by 25 basis points, “which coincides with the central bank's next set of quarterly forecasts.”
Regarding the Autumn Budget, a Bloomberg article reported that the UK’s Finance Minister, Healey, could increase taxes on banks.
Next week, the UK economic calendar will feature the release of Retail Sales, jobs and inflation data. In the US, housing data, Initial Jobless Claims and Flash PMIs are eyed by investors.
Given the backdrop, the GBP/USD path will be dictated by the UK’s inflation data. A hotter-than-expected read could prompt investors to increase their hawkish bets on the Bank of England, boosting the Pound, which so far remains below 1.3400.
GBP/USD Price Forecast: Technical outlook
In the daily chart, GBP/USD trades at 1.3340, holding a capped tone as the pair remains below the latest reading of the simple moving average cluster at 1.3418 and the descending trend-line resistance coming in near 1.3413. The additional upward-sloping support lines, now referenced at 1.3600 and 1.3789, sit well above spot and reinforce the notion of a broader corrective phase rather than a decisive bullish trend. The Relative Strength Index (14) at 53.34 has recovered into mildly positive territory, suggesting some stabilizing momentum, but this uptick is yet to challenge the dense overhead structure.
On the topside, immediate resistance is seen at the downtrend line around 1.3413, closely followed by the simple moving average barrier at 1.3418, which together form the first key supply zone. Further up, the former rising trend supports turned reference levels at 1.3600 and 1.3789 mark subsequent resistance bands that would need to be reclaimed to shift the broader bias. On the downside, initial support is provided by the prior descending trend-line break area around 1.3282, where a sustained hold would be needed to avoid a deeper slide toward lower psychological levels.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Nordea strategists concede their long‑standing positive view on the Swedish Krona (SEK) has not materialized and now adopt an agnostic stance. SEK has been hurt by Middle East‑related risk‑off flows, US tech outperformance, Riksbank policy lagging the ECB, and the "Scandie trade" favouring NOK. They say SEK strength requires lower Oil prices, easing inflation and lower global short rates.
Krona weighed by rates and oil
"Our long-standing positive outlook on the Swedish krona has failed to materialize."
"Furthermore, The Riksbank is lagging the ECB policy rate by a full 75 basis points, an unprecedented divergence."
"As of now the SEK is a funding currency."
"To make matters worse the krona has also been weighed down by the "Scandie trade," where the NOK is supported by higher energy prices and a policy rate that sits 275 basis points higher than the Riksbank's."
"We need to see a drop in oil priceswith easing inflationary pressures and lower global short rates in order for the SEK to strengthen again."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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