The euro is drawing support from broad dollar weakness as falling US Treasury yields and expectations for the Fed to hold rates steady at its upcoming meeting reduce the dollar’s appeal. A rotation out of technology stocks into government bonds has reinforced that move, although persistent US inflation concerns and the prospect of further tightening later in the year could limit its momentum. France’s fiscal and political strains remain a drag on the euro, while Middle East tensions and volatile energy prices threaten the region’s growth outlook and could revive safe-haven dollar demand. Attention now turns to eurozone and US flash PMIs for fresh signals on relative economic strength, ahead of next week’s central bank decisions and key US growth and inflation releases.

The pound remains supported by a hotter UK inflation backdrop, with stronger headline and core readings reinforcing expectations for a Bank of England rate hike in November and potentially further tightening in December. Persistent wage pressures and concerns about second-round inflation effects are strengthening the case for a more restrictive policy stance, helping preserve sterling’s yield appeal. Relative euro weakness has also supported the pound against the single currency, while expectations that the Federal Reserve will hold rates steady this month have provided some breathing room against the dollar. Attention now turns to UK retail sales for evidence of consumer resilience, with next week’s budget also in focus; however, expectations for renewed Fed tightening in December could limit further gains in GBPUSD.

The yen is navigating uncertainty over Japan’s progress toward sustained inflation, with Economy Minister Kiuchi saying conditions are still insufficient for the government to officially declare an end to deflation. His comments highlight the distinction between rising prices and confidence that inflation can endure, reinforcing caution around the pace of Bank of Japan policy normalization. The government will assess consumer prices, the GDP deflator, and the underlying drivers of inflation, while emphasizing coordination with the BoJ to achieve stable, sustainable price growth. For the yen, the implication is that further policy tightening remains dependent on convincing evidence of durable inflation, limiting support from expectations of higher Japanese interest rates.

The Australian dollar remains supported near its monthly high as hawkish RBA commentary keeps expectations for another rate hike alive. Deputy Governor Hauser’s warning that underlying inflation could exceed forecasts, alongside Christopher Kent’s suggestion that neutral interest rates are rising, has reinforced the prospect of further tightening. Better-than-expected Chinese growth has added support given Australia’s close trade ties with China. However, a modest US dollar recovery, oil-related inflation concerns, and Middle East tensions are limiting further gains. Attention now turns to next week’s Fed decision and US growth and inflation releases, which could reshape US rate expectations and determine whether the Aussie’s recent advance extends.