The EUR/USD and GBP/USD currency pairs showed moves over the past month that are worth recalling before we look ahead to the coming week. The euro fell almost without pullbacks for a month, but in the second half of last week it rallied—a move that again ran counter to macroeconomic data and fundamentals. That suggests the market may be tired of buying the dollar without justification. The pound fell for two weeks and traded in a range for three weeks, then took out liquidity at recent lows, cleared the lower edges of three sideways channels and began to rally. Thus, the pound's baseless decline appears to be over. On that basis, we think fundamentals, macro data, and geopolitics will not drive FX market sentiment next week.
In the Eurozone, the only moderately important releases next week are the October business-activity (PMI) indices for manufacturing and services. These reports shape how the economy is viewed, but traders are not focused on growth rates right now. The market is far more focused on inflation trends and monetary-policy prospects — and even in the European Central Bank's case these PMI releases did not move the euro much over the past month.
In the UK next week, PMI releases will also be out, along with unemployment, wages, inflation, a speech by Bank of England governor Andrew Bailey, and retail-sales data. Of those, inflation and Bailey's speech are key. UK CPI for September may accelerate to around 3.4% year-on-year, further pushing the BoE toward its first tightening (and more thereafter). As a result, the market could finally shift attention from Federal Reserve policy to the BoE's policy rate. If so, the pound would gain a powerful upside factor that markets had previously not priced in.
In the US next week, only secondary reports are scheduled, so we would not advise placing too much emphasis on them. Clearly, the market will be guided more by technicals and by UK inflation. If participants have become satiated with buying the dollar, the euro and pound can rise even without supportive macro or fundamental news. That is the scenario we favor.
In short, we expect European currencies to appreciate in almost any case. We believe technical, fundamental, and macro factors have already done all they can for the dollar. Only another "black swan" event could materially help the US currency further.
The EUR/USD pair continues to move downward, but we still view the decline as a correction ahead of a new uptrend. The global fundamental backdrop for the dollar remains negative, but in 2026, geopolitics and the Fed's hawkish stance have provided strong support for the US currency. With price below the moving average, consider shorts targeting 1.1169 and 1.1108. Above the moving average, long positions are appropriate with targets at 1.1314 and 1.1353.
The GBP/USD pair has begun an upward move that could develop into a longer-term trend. Donald Trump's policies will continue to exert pressure on the US economy, so we do not expect long-term dollar strength. So far, 2026 has been favorable for the dollar because geopolitics and inflation forced capital to seek safety and prompted the Fed to return to monetary tightening. However, on the weekly timeframe, a flat range between 1.3150 and 1.3780 remains within a four-year uptrend, supporting expectations of medium-term sterling appreciation. Consider long positions with targets of 1.3367 and 1.3415 if price is above the moving average. Price below the moving average allows bearish trading, with targets of 1.3184 and 1.3123.
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