EUR/USD today: the dollar eases and reshuffles forex

EUR/USD forex today: dollar, yen and pound in focus: EUR/USD today: the dollar

EUR/USD forex: updated analysis with context for investors.

EUR/USD today: the dollar: updated analysis with context for investors.

EUR/USD

The EUR/USD pair is trading today near 1.1218, with an intraday rebound after recent pressure on the dollar. FXStreet places the cross around 1.1255 during Friday, October 16 trading and attributes the move to weakness in the greenback.

Analysis. What is driving this is less the euro than the pullback in the dollar. The market is dialing back urgency for further Fed rate hikes after more cautious comments, and that is giving the pair some breathing room. Note: the upside has a ceiling if U.S. yields rise again or inflation worries return. In equities, a less aggressive dollar usually eases pressure on risk assets and companies indebted in USD.

Dollar

Reuters reports today that the dollar index is down 0.42% to 101.61 and is heading for its first weekly decline in more than a month. The market has cooled bets on an immediate Fed rate hike despite recent inflation data that remains sticky.

Analysis. This is the key catalyst of the day. If the market buys the idea that the Fed is in no rush, the dollar loses rate support and opens the door to rebounds in the euro, the pound and risk currencies. What you should watch now is whether that reading holds with bonds: if Treasury yields rise again, the dollar could quickly regain ground and cut short the relief in equities.

GBP/USD

The pound is marking highs of more than three weeks against the dollar today. Reuters puts it at 1.3329, up 0.40% on the session, supported by an upside surprise in UK growth and by expectations that the Bank of England will maintain a restrictive tone.

Analysis. The pound is gaining on two fronts: a weaker dollar and a UK economy proving more resilient than expected. That strengthens the view that the BoE still has room to stay tight. The limit is UK debt and the fiscal backdrop: if yields rise too far or budget noise returns, the pound’s improvement could stall. For equities, a strong pound supports the macro confidence narrative, but reduces competitiveness for exporters.

USD/JPY

The dollar is falling today against the yen in Reuters to 157.79, while Investing.com shows the pair in the 158.40 area in its currency table. The move comes with less upward pressure on the Fed and with warnings from the Bank of Japan about risks from underlying inflation.

Analysis. The yen improves when the U.S.-Japan rate differential narrows and when the market once again sees the BoJ as a central bank still uncomfortable with persistent inflation. Even so, the pair remains at very high levels, so any rebound in U.S. yields could quickly bring renewed downside pressure on the yen. In equities, a somewhat less weak yen could change expectations for Japanese exporters.

USD/MXN

USD/MXN is trading today at 18.3714 on Investing.com, with a daily gain of 0.07%. The Mexican peso is holding up relatively well, but it remains exposed to shifts in global sentiment and to the dollar’s performance in a session where the market is readjusting expectations for the Fed.

Analysis. The peso does not have a stronger domestic catalyst today than the global dollar move, but it is worth watching because it tends to amplify changes in risk appetite. If the dollar continues to soften and the tone in Wall Street equities improves, the MXN could regain ground. If risk aversion returns, the pair could turn quickly. For readers in Madrid, the key reference will be the New York open and its spillover into Mexico.

This article is general financial information and does not constitute investment advice.

Keep reading on the blog: EUR/USD today: U.S. jobs weigh on the dollar and the euro holds up and EUR/USD today: BoJ, pound and Fed shake up currencies.