The euro remains under pressure as French fiscal concerns and political uncertainty weigh on confidence in the region, with investors questioning the government’s ability to deliver spending cuts and contain its budget deficit. Pressure on French government bonds is adding to concerns about wider euro area risk, while the prospect of using constitutional powers to push through the budget highlights the difficulty of securing parliamentary support. Softer US jobs data and reduced expectations for another Fed rate hike offer some support to EURUSD, but hawkish Fed commentary continues to underpin the dollar, limiting that relief. The upcoming FOMC minutes will be closely watched for signals on the policy outlook, while substantial systematic short positioning could amplify a euro recovery if sentiment improves.

Sterling is under pressure as renewed US dollar strength and rising oil prices revive inflation concerns ahead of the FOMC minutes, although softer US jobs data have tempered expectations for another Fed rate hike and helped limit the downside. On the UK side, persistent price pressures continue to support expectations that the Bank of England will keep interest rates higher for longer. Catherine Mann’s warning that inflation could approach 4% around year-end highlights the risk that elevated energy costs feed into wage negotiations and prolong inflation persistence. This leaves the pound caught between support from a cautious BoE and the drag from energy costs on UK growth, with near-term direction sensitive to the dollar’s response to the Fed minutes.

The yen is under pressure as expectations for another near-term Bank of Japan rate hike fade, with policymakers favoring a gradual approach while assessing how recent tightening is feeding through to the economy. Markets have shifted their focus towards December for the next move, leaving interest rate differentials supportive of the dollar despite weaker US employment data tempering expectations for further Fed tightening. Hawkish Fed commentary and persistent inflation concerns continue to limit the yen’s recovery, with the upcoming FOMC minutes in focus for further policy guidance. However, the BoJ’s continued commitment to raising rates and the risk of Japanese currency intervention if depreciation accelerates could help contain further yen weakness.

The Australian dollar is under pressure as reduced expectations for another RBA rate hike weaken its interest rate support, with inflation coming in line with forecasts and markets increasingly favoring a November hold. On the US side, softer inflation and employment data have reinforced expectations for an October Fed pause, but hawkish comments from Kansas City Fed President Jeff Schmid have kept concerns about persistent inflation alive, offering the dollar some support. Attention now turns to the FOMC minutes for guidance on the Fed’s appetite for further tightening, with the Aussie sensitive to any shift in relative rate expectations and broader risk sentiment.