Currencies on the Edge: USD, EUR & GBP in Focus.

  • Dollar steady: USD gains are more about positioning costs and resilient US data than geopolitics.

  • US data in focus: Jobless claims and home sales are key near-term drivers for the dollar.

  • Euro vulnerable: EUR pressured by doubts over German fiscal stimulus; risks of a deeper pullback remain.

  • BoE tilt dovish: Bailey signalled confidence inflation will fall, opening the door to earlier and faster cuts.

  • Sterling at risk: Market repricing leaves GBP exposed, with forecasts pointing to further downside into 2025.

USD: Dollar Bears Waiting for a Break

The recent rise in the dollar doesn’t really look like a geopolitical story. If investors were truly worried about military tensions on NATO’s eastern flank, we’d be seeing bigger pressure on Central and Eastern European currencies and German equities. Instead, the dollar’s resilience seems more about positioning: being short USD is an expensive trade when one-week G10 funding rates show the dollar yielding the highest at 4.14% per annum.

US data hasn’t given sellers much ammunition either. New home sales just spiked back to early-2022 levels, and year-end Fed Funds pricing is a touch higher than September’s lows. Today’s calendar includes weekly jobless claims—expected near 230k after the fraudulent Texas spike—and existing home sales, with forecasts set at 3.95 million (annualised). A stronger number could give the dollar another lift.

Eight Fed officials are also on the agenda, led by Stephen Miran. While his dovish push is well known, it’s unlikely to be enough to drive USD materially lower on its own. For now, DXY looks pinned near 98. The bears need weaker US data to push back, but it’s unclear if they’ll get it today.

EUR: Sentiment Slips

The euro came under pressure after a softer-than-expected German Ifo reading, which reignited doubts about how quickly fiscal support can actually reach the real economy. Concerns remain that much of the announced support could just be “creative accounting.”

Our outlook still points to eurozone activity picking up in 2026, but in the near term, patience is key. For EUR/USD to climb later this year, we’ll likely need weaker US data and a Fed pivot rather than eurozone strength. Near-term risks remain: a break below 1.1725 could drag the pair towards the 1.1660 level.

GBP: Bailey Opens the Door to Faster Cuts

Sterling stumbled midweek after Bank of England Governor Andrew Bailey struck a dovish tone. Bailey noted there’s “further journey down in interest rates to go,” citing confidence that inflation is peaking and will trend lower into next year. This has put a November cut firmly on the table and forced markets to reassess the BoE’s trajectory.

The pound slid 0.6% against the dollar, touching 1.3462, and is trading near July lows versus the euro at 1.1450. UniCredit expects EUR/GBP to rise towards 0.95, which would take GBP/EUR down to 1.05—testing the bottom of its long-term range.

Bailey emphasised that the current 4.0% Bank Rate is restrictive and can be eased without stoking inflation, given much of the price pressure stems from temporary factors and policy decisions like national insurance changes. UniCredit sees two more cuts in November and December 2025, ending the year at 2.75% versus the market’s 3.6% expectation. If Bailey is serious about moving faster, sterling could remain under pressure in the months ahead.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.