– Written by


John Cameron

STORY LINK GBP/USD Forecast: Strong UK Jobs Data Lifts Pound Serling, BoE Rate Hike Bets

The Pound to US Dollar (GBP/USD) exchange rate moved higher on Tuesday after unexpectedly strong UK employment figures reinforced expectations that the Bank of England (BoE) will raise interest rates in November.

At the time of writing, GBP/USD was trading at around $1.3346, up approximately 0.3% from Tuesday’s opening levels.

Sterling found fresh support after the latest UK labour market report delivered a considerably stronger performance than economists had anticipated.

Figures from the Office for National Statistics (ONS) showed the unemployment rate fell from 4.9% to 4.7% in the three months to August, defying expectations for a broadly unchanged reading.

Employment also increased by 102,000, comfortably exceeding forecasts for a rise of just 20,000.

Wage growth provided further encouragement for Pound investors.

Regular earnings, excluding bonuses, accelerated from 3.6% to 3.7% year-on-year, suggesting that underlying pay pressures remain persistent despite earlier signs of a cooling labour market.

The stronger figures reinforced expectations that the BoE will deliver another 25-basis-point interest rate increase at its November meeting.

With unemployment falling and wage growth remaining firm, policymakers may have less reason to delay further tightening, particularly while inflation continues to exceed the Bank’s 2% target.

The prospect of higher UK borrowing costs helped Sterling strengthen against several of its major counterparts.

The US Dollar (USD), meanwhile, struggled to attract demand on Tuesday as improving market sentiment reduced appetite for traditional safe-haven currencies.

Although oil prices remained elevated and concerns persisted over the possibility of renewed escalation in the Middle East, investors showed a greater willingness to hold riskier assets.

Expectations that the Federal Reserve could raise interest rates more gradually than previously anticipated also limited support for the ‘Greenback’.

US political developments added another source of uncertainty.

Recent polling suggesting stronger support for the Democrats ahead of the mid-term elections raised questions over whether President Donald Trump could face greater opposition to his legislative agenda.

However, the Dollar’s losses remained relatively contained as investors continued to monitor geopolitical risks and the outlook for US monetary policy.

Near-Term GBP/USD Forecast: UK Inflation Could Extend Sterling’s Gains

Wednesday’s UK consumer price index (CPI) release will provide the next major test for the Pound to US Dollar exchange rate.

Economists expect annual headline inflation to accelerate from 3.1% to 3.4% in September, adding to concerns that price pressures remain stubbornly elevated.

Following Tuesday’s stronger employment figures, an above-forecast inflation reading would strengthen the case for another Bank of England rate increase in November.

This could allow Sterling to build on its latest gains and challenge the $1.3400 level.

However, a softer inflation reading could temper expectations for further tightening and encourage some profit-taking following the Pound’s recent recovery.

For the US Dollar, the absence of major economic releases may leave broader market sentiment as the main influence on trading.

Renewed geopolitical tensions or a deterioration in risk appetite could revive demand for the safe-haven Dollar, potentially limiting GBP/USD’s upside.

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TAGS: Pound Dollar Forecasts

USD/JPY remains stuck near key resistance at 158.00 – 158.50 as traders focus on Treasury yield dynamics. The yield of 2-year Treasuries climbed towards the 4.79% level, while the yield of 10-year Treasuries pulled back towards 5.12%.

In case USD/JPY declines below the 158.00 level, it will head towards the 157.00 level. A move below 157.00 will open the way to the test of the support at 155.00 – 155.50. RSI is in the moderate territory, so there is plenty of room to gain downside momentum in case the right catalysts emerge.

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2026.10.20 2026.10.20
US Stock Market Trends Drive the Dollar. Forecast as of 20.10.2026

Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/

Before the release of US inflation data, the currency market reacted to movements in Brent crude prices. Rising oil prices were seen as a sign of accelerating inflation and higher Fed interest rates. This strengthened the US dollar. Now things are different. Let’s discuss this topic and make a trading plan for EUR/USD. 

Major Takeaways

• European assets are being sold off.
• France faces a major budget challenge.
• The US dollar reacts to stock market movements.
• Selling EURUSD if the price fails to break above 1.128, 1.13, or 1.134 remains a relevant strategy.

Weekly Fundamental Forecast for Dollar

US Treasury yields are rising because of a strong US economy and expectations that the Fed will continue tightening monetary policy. European bond yields are rising because of protests in France and other European countries. Is there a difference? Absolutely! And this difference raises doubts about whether the EUR/USD rally can last.

The yield spread between French and German bonds has reached a two-week high and is approaching the 15-year peak recorded in early October. To keep its debt at the current level of approximately 120% of GDP, France would have to achieve something remarkable: keep its budget deficit below 2% of GDP for several consecutive years. It has not managed to do so since the 1970s.

French-German Bond Yield Spread

Source: Bloomberg.

The government aims to reduce the budget deficit to 5% of GDP by cutting spending by €43 billion. However, voters oppose these measures. People are taking to the streets to protest against the rising cost of living. The wave of discontent is spreading beyond France to Italy, Portugal, Belgium, and other eurozone countries. 

Protests are slowing economic activity and boosting support for right-wing parties willing to confront the EU, potentially even leaving the currency bloc. The euro faces a double blow from slower GDP growth and rising Frexit risk. It is no surprise that European assets are being sold off so quickly. Yet EUR/USD is not falling. It is actually trying to rise! A paradox?

In fact, it is not France but the US stock market that is setting the tone in Forex. The sell-off in technology stocks during the week ending October 16 gave way to a rebound at the start of the new trading week. Investors bought the dip and started selling Treasury bonds. Why seek safe-haven assets when the Nasdaq 100 is doing well?

US Treasury Yields and the Nasdaq 100

Source: Bloomberg.

As a result, Treasury yields rose, supporting the US dollar and helping it recover. EURUSD fell. Then the Nasdaq 100 stumbled, Treasury yields followed it lower, and the euro launched another counterattack.

Oil no longer drives the foreign exchange market. US stock indices and American exceptionalism now drive the Forex market. Under normal circumstances, a decline in the S&P 500 and weaker global risk appetite would be seen as a signal to buy the US dollar as a safe-haven currency. But not today.

In my view, fears surrounding technology giants and AI bubbles are overblown. Strong corporate earnings will renew interest in AI, push the Nasdaq 100 higher, and reassure US dollar bulls.

Weekly Trading Plan for EUR/USD

Thus, a failure to break above the resistance levels of 1.128, 1.13, or 1.134 would provide an opportunity to sell EUR/USD.

This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.

Price chart of EURUSD in real time mode

The pair continued its corrective upward trading, reaching the resistance level at 211.20 and settling below it. We highlight the importance of monitoring price action at this stage and waiting for the close of the next four-hour candle to confirm the expected direction for the upcoming trading sessions.

Continued trading below the current resistance would increase the chances of renewed bearish attempts, with initial targets at 210.30 and 209.60, breaking above the resistance and holding there would give the pair an opportunity to launch a fresh bullish move, initially targeting 212.00 and 212.65.

The expected trading range for today is between 210.30 and 211.40

Trend forecast: Neutral

The pair has maintained its stability below the additional resistance barrier at 177.80, reaffirming its commitment to the previously suggested bearish scenario. The current sideways movement reflects continued conflicting signals from the main technical indicators. We therefore await further negative momentum to help the pair resume its bearish waves, targeting 176.35 and 175.75.

Conversely, a break above the current barrier and sustained trading above it would give the pair an opportunity to recover further losses, by rising gradually toward 178.60 and 179.40.

The expected trading range for today is between 176.35 and 177.80

Trend forecast: Bearish