In the European market, the euro tried to rally a bit during the trading session. Today, third-quarter euro area GDP was released, with the flash estimate coming in at 0.4% quarter-on-quarter, down from 0.6% during the previous quarter. That being said, it’s also worth noting that the ECB held its deposit rate at 2.5% yesterday. That was not a huge surprise; it was expected.

Its statement did warn that higher energy prices posed upward inflation risk and downward growth risk—not a combination we want. So, with that being the case, this is a market that I think we should continue to fade rallies. We’ve already seen that today. If we can break below 1.11, I’ll be aiming for 1.10. Full disclosure: I’m already short of this market and have no interest in buying it.

Retail Sales increased by +2.3% year-over-year in September, compared to analyst consensus of +3.3%. Industrial Production grew by +2.2%, while analysts expected that it would increase by +1.3%. The report did not have a material impact on market dynamics as traders have mostly focused on BoJ decision.

Both Fed and BoJ decided to take a pause, and USD/JPY traders remained in wait-and-see mode. The Japanese yen remains fundamentally weak, but bulls are worried that BoJ may intervene in case USD/JPY climbs towards the 160.00 level.

In case USD/JPY stays below the 50 MA at 157.57, it will head towards the 157.00 level. A move below 157.00 will push USD/JPY towards recent lows near 156.00.

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Euro: Lagarde to Leave Early

The ECB kept its deposit rate at 2.5% on Thursday, hours after President Christine Lagarde said she will step down on February 7, 2027, nine months before her term ends, because she can no longer “remain neutral.” Lagarde said the Governing Council debated a hike before holding unanimously, and signaled the pause may only last until December. She noted the average eurozone 10-year bond yield has risen about 35 basis points, or 0.35 percentage point, since the September projections, and told high-debt governments to plan for rates staying higher for some time and keep budgets within EU rules, Euronews reported. She avoided naming France, blaming global factors instead.

The euro briefly fell to its lowest since May 2025 on Thursday and is on track for a 1.2% monthly drop, Reuters said, even though the ECB just talked about hiking. That shows the French bond problem and the leadership gap matter more to traders than one extra rate move. Eurozone third-quarter GDP data are due Friday.

The pair has continued to form weak sideways trades so far, amid ongoing conflicting signals from the main indicators, currently fluctuating near 176.25 and moving away from support at 174.90, which represents the key level for confirming the continuation of the bearish trend in the upcoming period.

The price may manage to achieve some intraday gains; however, its repeated stability below the additional resistance barrier at 177.80 keeps us committed to our bearish outlook for the coming trades. On the other hand, breaking above this barrier and holding above it would increase the chances of further gains toward 178.50 and 179.10.

The expected trading range for today is between 175.70 and 176.85

Trend forecast: Fluctuating

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Rises as UK Gilt Yields Hit Five-Week Low

The Pound to US Dollar (GBP/USD) exchange rate climbed on Thursday as falling UK government borrowing costs provided support for Sterling following Wednesday’s Autumn Budget.

At the time of writing, GBP/USD was trading at around $1.3370, up approximately 0.3% on the day.

The Pound (GBP) strengthened as investors continued to assess Chancellor John Healey’s first Autumn Budget, with the initial reaction in UK bond markets proving relatively encouraging.

Healey’s decision to adhere to the government’s fiscal rules appeared to reassure investors who had been concerned about the possibility of additional borrowing or measures that could undermine confidence in the public finances.

The Chancellor also avoided major policy surprises that might have unsettled gilt markets, helping UK government borrowing costs retreat further.

The benchmark 10-year gilt yield fell to its lowest level in five weeks, easing some of the pressure that elevated debt-servicing costs have placed on the Treasury.

Although falling yields can sometimes reduce a currency’s appeal by narrowing its interest rate advantage, Thursday’s decline appeared to reflect greater confidence in the UK’s fiscal position rather than expectations of looser Bank of England monetary policy.

This distinction helped Sterling benefit from the move, with investors welcoming signs that the Budget had avoided triggering another bout of bond market volatility.

Nevertheless, concerns about the UK’s economic outlook remain. The Office for Budget Responsibility’s downgrade to its 2027 growth forecast continues to raise questions about the strength of the economy over the coming year.

The US Dollar (USD), meanwhile, weakened as improving market sentiment reduced demand for traditional safe-haven currencies.

The ‘Greenback’ had already come under pressure following Wednesday evening’s Federal Reserve interest rate decision.

As widely expected, policymakers left borrowing costs unchanged, but the accompanying guidance prompted markets to modestly reduce expectations of another rate increase in December.

This adjustment weighed on the Dollar, particularly as investors became more willing to move into riskier assets.

Sentiment also improved following reports of renewed diplomatic efforts to ease tensions between the US and Iran.

A letter from US Vice President JD Vance to Iranian security chief Mohsen Rezaei was reportedly ‘received well’ by Tehran, raising hopes that negotiations between Washington and Iran could resume.

The prospect of a diplomatic breakthrough helped ease some of the geopolitical concerns that have supported demand for the safe-haven Dollar in recent months.

Stronger-than-expected US economic data failed to reverse the currency’s decline.

Preliminary figures showed that the American economy expanded at an annualised rate of 3.4% during the third quarter, accelerating from 2.2% in the previous three months.

The reading exceeded forecasts for 3.2% growth, suggesting that the US economy retained considerable momentum despite elevated borrowing costs.

However, the positive figures were insufficient to offset the pressure from improving risk appetite and reduced expectations of further Federal Reserve tightening.

Near-Term GBP/USD Forecast: Can Sterling Extend Recovery towards $1.34?

The Pound to US Dollar exchange rate could remain sensitive to broader market sentiment on Friday, with few major economic releases scheduled in either the UK or US.

A continuation of Thursday’s more positive market mood could favour Sterling, particularly if investors remain encouraged by the reaction to the Autumn Budget.

Further declines in UK gilt yields would also provide some reassurance that Chancellor John Healey’s fiscal plans have avoided unsettling bond investors.

This could help GBP/USD challenge the $1.3400 level, which remains the immediate upside reference point following Thursday’s recovery.

A sustained move above this area would strengthen the case for further Sterling gains.

However, the Dollar could regain ground if geopolitical tensions intensify or global equity markets come under renewed pressure.

Developments in the Middle East will remain particularly important, with any setbacks in diplomatic efforts potentially reviving demand for safe-haven assets.

Investors will also continue assessing the Federal Reserve’s policy outlook following Wednesday’s decision.

Any renewed speculation that US policymakers could raise interest rates in December may provide additional support for the Dollar.

For GBP/USD, a retreat below $1.3350 could weaken the near-term recovery, potentially bringing the $1.3300 level back into focus.

The direction of UK bond yields and broader risk appetite will therefore remain important influences as the pairing approaches the end of the week.

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TAGS: Pound Dollar Forecasts