The US dollar extended its weekly rebound overnight, gaining ground against the euro and particularly the pound, propelling the dollar index above 99 for the first time in seven days.
This strength was amplified by softer-than-expected UK September inflation data, which held headline CPI steady at 3.8% year-over-year, below the 4% forecast, while core CPI eased to 3.5%, two-tenths under estimates. The softer data fueled bets for 22 basis points of Bank of England easing by year-end, dragging the pound lower.
The euro also faced headwinds, with EUR/USD dipping to an eight-day low amid fading hopes for a Ukraine–Russia breakthrough after President Trump dismissed a potential meeting with Putin as “potentially wasted.” Yet Trump struck an optimistic tone on trade, forecasting a positive outcome from his upcoming summit with President Xi and rallying Senate Republicans amid the ongoing US government shutdown.
Meanwhile, EUR/CHF’s six-day losing streak appears poised to end, rebounding from a 2025 trough after UBS suggested the Swiss National Bank may be intervening to curb franc appreciation. The bank flagged elevated risks of such action, skewing upside risks for the cross.
SNB Chairman Martin Schlaggel echoed that vigilance, projecting a modest uptick in Swiss inflation over coming quarters but warning that US tariffs on pharmaceuticals could heighten economic risks amid persistent uncertainties. He reaffirmed the central bank’s readiness to adjust policy as needed.
With a light data calendar ahead, attention now turns to Friday’s US CPI report and scheduled remarks from ECB officials including Luis de Guindos and Christine Lagarde.
Exclusive FX research from LMAX Group Market Strategist, Joel Kruger
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