Powell Softens the Dollar; GBP Attempts Rebound, EUR Stuck in the Range.

• USD is under mild pressure following dovish Fed signals, though much of its potential weakening is already baked in unless a strong shock unfolds.

• EUR is range-bound and vulnerable; weak macro and political stress in the eurozone make upside rebounds hard.

• GBP is attempting a technical bounce, but fundamentals remain weak; sterling risks further downside unless UK data or Budget surprises.

USD: 

The dollar has come under some pressure following comments from Fed Chair Powell, which were seen as leaning dovish. Markets interpreted Powell’s speech as signalling downside risks in the U.S. labour market and hinting that the current balance sheet tightening may end soon. As a result, U.S. Treasury yields have softened, contributing to a pullback in the dollar. The ongoing U.S. government shutdown continues to act as a headwind, suppressing fresh data and amplifying uncertainty, which dampens conviction in strong dollar rallies. On the outlook, many strategists believe much of the expected dollar softening is already priced in, meaning further downside may require a significant catalyst.

In the short term, USD may drift lower modestly if the dovish tone holds and no strong countervailing data emerges. A deeper slide would likely need sharper surprises such as poor U.S. growth or inflation data, or a sustained global risk-on turn. On the flip side, any hawkish pivots (e.g. stronger-than-expected inflation or surprises in credit markets) could re-energize dollar bids.

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EUR: 

EUR/USD is holding near lower bounds, with the euro struggling to gain traction against the backdrop of dollar softness and political uncertainty in Europe. In particular, developments in France (e.g. government instability) continue to cast a shadow over euro sentiment. The euro is testing support zones, and technical watchers are watching for either a breakdown below or a rebound.

Near term, EUR/USD could see limited upside unless there is a shift in risk appetite or a strong eurozone macro surprise. A break below key support between 1.1580–1.1550 would point to further downside pressure. On the upside, overcoming resistance in the 1.1650–1.1700 zone would help restore more neutral technical balance.

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GBP: 

GBP/USD is currently showing signs of a mild rebound after recent weakness, having bounced off the 200-day EMA. That said, the broader context remains challenging for sterling: weak labour data, fiscal uncertainty ahead of the UK autumn Budget, and dovish expectations for the Bank of England continue to weigh. Technical patterns remain tilted to the downside. On the upside, regaining resistance near ~1.3340–1.3360 would be important to reverse or slow the slide.

Unless there is a positive surprise (e.g. stronger inflation, upbeat GDP), GBP is more likely to trade under pressure. Key upcoming UK data (GDP, goods trade, inflation) and Budget announcements will carry outsized influence. If markets lock in further BoE easing expectations, sterling could weaken more sharply.

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