The euro remains under pressure as investors position for a busy week of central bank decisions, with the Federal Reserve and European Central Bank set to announce policy decisions just one day apart. The single currency has struggled to capitalize on encouraging German economic data, with October’s Ifo business climate index rising more than expected, supported by an improvement in business expectations even as current conditions weakened. The report offers some reassurance that Europe’s largest economy is finding its footing, though persistent fiscal and political uncertainty in France continues to temper enthusiasm for the euro. Attention now turns to the ECB, which is widely expected to leave rates unchanged on Thursday, with investors focused on President Lagarde’s assessment of inflation, growth, and the prospects for further tightening in December. Meanwhile, expectations for a more hawkish Fed and the prospect of a widening US-Eurozone interest rate differential have reinforced dollar demand. Tuesday’s ECB bank lending survey and Lagarde’s remarks will provide additional insight into the regional outlook ahead of Thursday’s decision, with the euro likely to remain sensitive to any shift in relative monetary policy expectations.

The Pound has come under modest pressure, with recent weakness against the US Dollar largely reflecting renewed Dollar demand ahead of Wednesday’s Federal Reserve decision rather than a deterioration in UK fundamentals. Sterling has held relatively steady against the Euro, supported by expectations that the Bank of England will raise interest rates at its November meeting following persistent inflation pressures and resilient wage growth. Attention is now turning to Chancellor Reeves’ upcoming Budget, where fiscal policy, potential tax changes, and government borrowing plans will be closely scrutinized for their implications for growth, inflation, and gilt yields. Reports of a further increase in the minimum wage have reinforced concerns over persistent domestic cost pressures, adding to the case for tighter monetary policy. With the Fed decision, UK Budget, and upcoming US inflation data all on the calendar, Sterling’s near-term direction will likely depend on the interaction between UK fiscal credibility, BoE policy expectations, and broader Dollar sentiment.

The yen has come back under pressure as investors look ahead to Friday’s Bank of Japan policy decision, with markets widely expecting the central bank to leave rates unchanged following September’s hike. Governor Ueda has signaled little urgency to deliver consecutive rate increases, shifting attention to his guidance on the timing of further tightening, particularly the possibility of another move in December. While underlying inflation pressures and wage growth continue to support the case for additional policy normalization, uncertainty surrounding Japan’s economic outlook and the sustainability of inflation has kept the BoJ cautious. Upcoming Tokyo inflation and employment figures will provide another important test of the tightening outlook, while the Federal Reserve’s policy decision and key US economic releases could prove equally influential through their impact on US Treasury yields and interest rate differentials. With a near-term BoJ hold largely priced in, the yen may need a more hawkish signal from Ueda or a meaningful retreat in US yields to regain sustained upside momentum.

The Australian dollar has come under modest pressure as renewed US dollar strength offsets otherwise supportive risk sentiment and expectations of further Reserve Bank of Australia tightening. The RBA’s relatively hawkish stance continues to underpin the Aussie, with persistent domestic inflation pressures keeping the prospect of another rate hike firmly in focus. Attention now turns to Wednesday’s Australian inflation figures and remarks from RBA Governor Michele Bullock, with any upside surprise in underlying price pressures likely to reinforce expectations for additional tightening. Meanwhile, easing oil prices amid diplomatic efforts in the Middle East have helped improve broader market sentiment, although geopolitical uncertainty remains a source of caution. The Federal Reserve’s policy decision and Chair Kevin Warsh’s accompanying guidance will also be critical, with the outlook for US interest rates and the dollar likely to influence the Aussie’s near-term direction.