The euro is firmer against the dollar as rising inflation and more hawkish ECB commentary bring a December rate hike into sharper focus. Higher energy costs pushed eurozone inflation to 4% in October, and remarks from the German and Italian central bank governors reinforced the case for further tightening, though ECB President Christine Lagarde has kept the decision tied to incoming data. A softer dollar has helped the euro recover, but stronger-than-expected US payrolls and a dip in unemployment keep a December Fed hike firmly in play. This week’s US inflation releases are the next test for the rally, with an upside surprise likely to lend the dollar fresh support.

Sterling edged higher at the start of the week as the Bank of England’s hawkish rate hike continued to lend support. With higher energy prices keeping inflation risks elevated, markets are pricing in three more BoE hikes by the end of next year. Chief Economist Huw Pill struck a more cautious tone, though, leaving room for the Bank to hold or even cut rates if growth stalls. On the US side, stronger-than-expected payrolls and a lower unemployment rate reinforced expectations for a December Fed hike, keeping the dollar supported and limiting the pound’s rebound.

The yen firmed against the dollar early Monday as the Bank of Japan’s September minutes reinforced expectations for a December rate hike. The BoJ held rates steady in October, but the minutes showed broad agreement that further tightening would be appropriate as underlying inflation approaches target. The yen also benefited from safe-haven demand during the recent equity selloff, when falling Treasury yields dulled the dollar’s appeal. The main counterweight is US monetary policy. Stronger-than-expected October payrolls, a lower unemployment rate and San Francisco Fed President Mary Daly’s emphasis on persistent inflation have strengthened the case for a December Fed hike, limiting the scope for further yen gains.

The Australian dollar is firmer as China’s decision to extend its tariff reprieve on US imports lifts risk appetite ahead of the expected Trump–Xi meeting at APEC. Beijing is keeping its existing tariffs in place, but the extension eases the immediate risk of a renewed trade escalation, a welcome development for the Aussie given Australia’s exposure to Chinese demand. At home, the RBA’s latest rate hike has offered limited support, with a split vote and cautious guidance leaving the door open to a December pause even as inflation remains above target. For now, the improvement in global risk sentiment is doing more to lift the Aussie than expectations for further domestic tightening.