The euro remains under pressure against the dollar as resilient US activity and hawkish Fed commentary keep expectations of further tightening alive. That has outweighed support from the eurozone’s stronger September business surveys and the ECB’s recent rate increase. Higher energy costs are adding to eurozone inflation risks and the case for another ECB hike, but they also threaten growth, leaving the euro vulnerable while investors see the US economy holding up better.

Sterling remains under pressure as UK fiscal concerns add to a broader rise in the dollar. August borrowing came in above expectations, leaving the deficit for the financial year to date ahead of official forecasts and increasing scrutiny of the government’s room to maneuver ahead of October’s Budget. September’s softer UK business surveys have added to growth concerns, especially after stronger US readings reinforced the dollar. The Bank of England’s concern that high energy prices could keep inflation elevated is supporting expectations of a rate hike, but that prospect has offered the pound limited relief while investors weigh the same energy shock’s effect on UK growth and public finances.

The yen has recovered modestly after USDJPY kissed 159, as the risk of Japanese intervention made traders cautious about pushing the pair closer to 160. Hopes for US-Iran diplomacy have also taken some strength out of the dollar by easing oil and inflation concerns. The broader pressure on the yen remains, though: the Bank of Japan’s recent rate increase has done little to close the wide interest rate gap with the US, while expectations of further Fed tightening continue to support US yields and the dollar. For now, intervention risk is limiting yen weakness, but the rate gap remains the main obstacle to a sustained recovery.

The Australian dollar has steadied as traders weigh support from a hawkish RBA against a firm US dollar. Australia’s unemployment rate rose slightly in August, but stronger job growth and higher labor force participation suggest the labor market remains resilient, keeping expectations of a rate hike next week intact. The extension of the US–China trade truce has also helped sentiment toward the Aussie, given Australia’s exposure to Chinese demand, although the Trump–Xi summit offered little progress on the larger disputes. Meanwhile, elevated US yields and expectations of further Fed tightening continue to limit the currency’s gains.