The euro is finding some relief as the Dollar eases ahead of today’s key data, but the broader fundamental backdrop remains challenging after several sessions of losses. Hawkish Fed commentary, including Lorie Logan’s call for further tightening, has supported US rate expectations and kept the single currency under pressure. Attention now turns to Eurozone inflation, where an expected acceleration could reinforce expectations for additional ECB rate hikes and offer the euro some support. The US employment report will be equally important: resilient hiring and firm wage growth would strengthen the case for further Fed tightening, while softer labor market conditions could temper those expectations and give the euro room to recover.

The pound remains under pressure as broad US Dollar strength combines with mounting concerns over the UK’s fiscal outlook. Oil-driven inflation risks and persistent US-Iran tensions are keeping US Treasury yields elevated and supporting safe-haven demand for the Dollar, even as expectations for an October Fed rate hike have eased. Meanwhile, the surge in long-term gilt yields is weighing on sterling by raising government borrowing costs and intensifying concerns about fiscal headroom ahead of the Autumn Budget. We now look to US payrolls for the next major catalyst, with a firm report potentially reinforcing Dollar demand, while softer employment and wage growth could offer the pound some relief.

The yen has regained support after stronger Tokyo inflation reinforced expectations for further Bank of Japan tightening, with the acceleration in underlying price pressures suggesting inflation extends beyond food and energy. A softer Dollar, reflecting reduced expectations for an October Fed rate hike, has also helped the currency recover. However, elevated US Treasury yields and lingering expectations for a December hike continue to limit the yen’s upside, as energy-driven inflation concerns keep US monetary policy in focus. Attention now turns to US payrolls, which could determine whether the recent easing in Dollar demand develops into a more sustained recovery for the yen.

The Australian dollar remains under pressure as elevated energy costs sustain US inflation concerns, keeping US yields high and supporting the US dollar ahead of the latest US employment report. A softer jobs reading could temper expectations for further Fed tightening, making the release a key near-term catalyst. Domestically, persistent inflation is keeping another RBA hike in play, although the lagged effects of earlier tightening and emerging property-sector weakness favor a patient approach. CBA sees the hiking cycle as paused for now but considers November’s meeting live, with upcoming inflation data likely to determine whether the RBA delivers additional tightening and provides fresh support for the currency.