USD Extends Strength on Fed Rhetoric — GBP Faces Policy Headwinds, EUR Stays Range-Bound.

• USD – Holding firm and getting stronger on the back of hawkish Fed messaging.

• EUR – Stable for now, but reliant on external drivers (USD path) and internal euro-zone data/policy.

• GBP – Under pressure, driven by UK policy/fiscal concerns and bearish technical signals.

USD:

The dollar is showing strength, backed by a more hawkish tone from the Federal Reserve and a reduction in market expectations of how soon rate cuts will come. The dollar index is approaching the upper bound of its recent range, reflecting increased yield support and the market’s recalibration of policy risk.

If the Fed continues to emphasise caution or delay rate cuts further, the dollar may maintain its strength or even rise further. On the flip side, weaker-than-expected U.S. data, resolution of the U.S. government shutdown, or improved global risk appetite could dent the dollar’s momentum.

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EUR: 

The euro is relatively steady, but remains closely tied to the dollar’s trajectory and the policy path of the European Central Bank. Technical/forecast commentary suggests EUR/USD remains range-bound for now, with possible upside if the euro-zone data and policy backdrop improve. The European Central Bank left its main rate at 2.0% for a third meeting on October 30th, and President Lagarde said policy was “in a good place” given the current slowdown. In fact, euro-area inflation has been moderating – markets believe the ECB has likely finished tightening and will cut rates before raising them.

If euro-zone data surprises on the upside or the ECB adopts a more hawkish tone, the euro could gain. A stronger dollar, disappointing euro-zone growth or more dovish ECB comments could weigh on EUR.

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GBP: 

Sterling remains under pressure ahead of the upcoming Bank of England meeting, as markets increasingly price in possible rate cuts and growth/fiscal concerns in the UK. Technical signals are bearish for GBP/USD, with some commentary pointing to the next support near 1.30.

Without a meaningful positive surprise (UK data, fiscal clarity, BoE hawkish commentary), sterling may continue to struggle. If the BoE signals more dovishness or fiscal concerns deepen, GBP could weaken further. Conversely, any surprise hawkish guidance or favourable UK data could provide a rebound opportunity.

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