Forex News

• EUR/GBP edges lower as traders brace for key UK and Eurozone risk events.
• UK tax and spending plans take centre stage ahead of Thursday’s ECB decision.
• France’s fiscal concerns keep the Euro on the back foot against the British Pound.

EUR/GBP edges lower on Tuesday amid a mixed market mood, with the British Pound (GBP) outperforming the Euro (EUR) as France’s fiscal concerns weigh on the single currency. However, both currencies remain weak against their other major peers as traders brace for key events this week. At the time of writing, EUR/GBP trades around 0.8364, near levels last seen in May 2025.

The UK Autumn Budget on Wednesday is the key event for the British Pound. Chancellor John Healey faces pressure to ease living costs while keeping government borrowing under control. Traders will assess whether tax and spending plans leave enough room to meet the government’s fiscal rules.

Analysts at OCBC highlight that “a Budget that preserves a meaningful fiscal buffer while maintaining a credible tightening path should keep the UK fiscal risk premium contained,” and that, together with “continued foreign demand for gilts,” this backdrop would “remain supportive for GBP.” OCBC adds that this resilience, set against “comparatively softer euro-area momentum and lingering French sovereign concerns,” continues to support GBP against EUR, underpinned by a “relatively more hawkish BoE outlook.”

The Bank of England (BoE) and the European Central Bank (ECB) are expected to take different steps at their upcoming meetings. The ECB announces its monetary policy decision on Thursday and is widely expected to keep its deposit rate unchanged at 2.50%. The central bank has already raised rates by a cumulative 50 basis points (bps) this year to counter inflation pressures from higher energy costs.

Analysts at Brown Brothers Harriman note that "contained Eurozone underlying inflation and tighter financial conditions" give policymakers scope to pause for now. However, they caution that "resilient economic activity and inflation projected to remain above target for an extended period keep a December rate hike to 2.75% firmly in play (75% priced in)." Against this backdrop, BBH expects that "France’s bond market turmoil is likely to dominate ECB President Christine Lagarde’s press conference."

The BoE announces its interest rate decision on November 5, with traders fully pricing in a 25 bps hike. The central bank has kept rates unchanged so far this year as policymakers saw limited signs of higher energy costs spreading into broader prices and wages. However, the latest rise in inflation, alongside steady labour market and growth figures, has strengthened expectations of an increase.

BoE Governor Andrew Bailey said earlier this month, “Inflation risks rise the longer high energy prices persist.” Bailey added, “Monetary policy needs an unwavering commitment to returning inflation to target.”

• US private employers added an average of 16.75K jobs per week in early October.
• The loss of momentum in hiring remained unchanged.

Private-sector hiring in the US has weakened further in early October. According to the NER Pulse, the weekly companion to the ADP National Employment Report, companies added an average of 16.75K jobs per week in the four weeks ending October 10.

That marks a modest drop from the prior reading (17.50K), showing extra cooling in hiring.

Market reaction

The Greenback extends its recovery on Tuesday, reclaiming the area above the 102.00 yardstick when gauged by the US Dollar Index (DXY). That said, the index clinches its third consecutive daily advance amid steady pre-FOMC caution among market participants.

MUFG’s Derek Halpenny highlights continued Euro weakness, noting EUR remains the worst performing G10 currency this month despite a narrowing OAT/Bund spread and more supportive swap differentials. The analysis links renewed EUR/USD downside to rising natural gas prices and growing investor scepticism over the European economy’s ability to withstand the ongoing energy price shock.

Euro slides despite supportive spreads

"For the euro, the notable narrowing of the OAT/Bund spread did little to bring EUR buyers to the market and that underlines the continued negative sentiment and momentum."

"For much of the time in recent months, rising natural gas prices had limited impact on the euro with ECB rate hike expectations strengthening to provide support."

"However, EUR/USD is now sinking again even though the 2-year swap spread has moved by nearly 15bps in favour of the euro since 5th October."

"The European economy has shown resilience to date to the energy price shock but investors are turning sceptical over the prospect of that resilience continuing."

"The focus looks to have shifted away from imminent OAT risks to the risk to the economy from rising energy prices – natural gas prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

ING strategists Francesco Pesole, Chris Turner and Frantisek Taborsky note the US Dollar (USD) has started the week on a firm footing, helped by stabilising AI sentiment, a hawkish Federal Reserve backdrop and high energy prices. They highlight US consumer confidence as key near-term drivers, and expect the Dollar to remain broadly supported around the FOMC decision.

Dollar supported into FOMC week

"The dollar has found good support early this week, as stabilising AI-related sentiment has allowed markets to reconnect with the broader supportive backdrop of a hawkish Federal Reserve and high energy prices."

"Pre-FOMC positioning may also be kicking in, with the forward-looking FX market viewing Chair Kevin Warsh's reiteration of inflation commitments as reinforcing the structural floor for the dollar. As discussed in our preview, we sympathise with this view and expect a broadly supported dollar this week."

"Today, the US calendar is rather busy. The highlight is the Conference Board consumer confidence index, which surprisingly plummeted to 81.9 in September. We expect an 81.5 print; consensus is 81.0."

"Surprises here aren’t likely to be enough to sway tomorrow’s Fed tone, but pricing for further tightening has shown some fragility of late, and evidence of deteriorating consumer mood could enter the equation. The other releases are all lower tier: September’s durable goods orders and new home sales, as well as the Richmond Fed manufacturing index."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that USD/CHF extended its rapid rise to 0.8278, leaving short-term conditions overbought but still allowing scope for a test of 0.8290, with limited potential for sustained gains above that level. On a 1–3 week horizon, upward momentum is building from a previously neutral stance, and a daily close above 0.8290 could open room toward 0.8320, provided 0.8230 holds as strong support.

Watching 0.8290 for bullish confirmation

"24-HOUR VIEW: Last Friday, USD rose sharply to a high of 0.8255. Yesterday, when USD was at 0.8250, we indicated that “the rapid rise could extend, but a clear break above 0.8265 appears unlikely.” USD rose more than expected to 0.8278 before settling at 0.8271 (+0.27%). Conditions are overbought after the sharp rise over the past two days, but there is scope for USD to test 0.8290. A sustained advance above this level is unlikely. Support is at 0.8250."

"1-3 WEEKS VIEW: We revised our USD view from negative to neutral yesterday (26 Oct, spot at 0.8250). We indicated that “downward momentum has faded.” We also indicated that USD “has likely entered a range-trading phase between 0.8200 and 0.8290.” We did not quite expect USD to approach 0.8290 so quickly as it rose to a high of 0.8278. Upward momentum is starting to build, and if USD closes above 0.8290, it could rise to 0.8320. To sustain the momentum buildup, USD must not break below 0.8230 (‘strong support’ level)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Societe Generale’s Kenneth Broux and team note AUD/USD has defended its March uptrend near 0.6900 and is trading sideways around the 100-day moving average, outperforming G10 currencies ahead of Australian CPI and the RBNZ decision. They highlight nearby resistance at 0.7050/0.7080, with short-term support at 0.6950 and scope for a larger rebound if resistance breaks.

Aussie holds trend support

"AUD/USD defended the ascending trend line drawn since March near 0.6900, resulting in a brief rebound."

"The pair is now approaching the confluence of the 50-DMA and the 200-DMA at 0.7050/0.7080, which represents an important interim resistance zone."

"If AUD/USD overcomes this hurdle, a larger rebound cannot be ruled out."

"The low achieved last week at 0.6950 is a short-term support."

"Spot grinding sideways, glued to 100dma (0.7033), outperforms G10 with NZD ahead of Aussie September and 3Q CPI, and RBNZ interest rates decision tonight (consensus +25bp)."

"Support 0.6950, resistance 0.7080."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)