Weekly Currency Briefing: Monday Update
Rainstone FX Ltd 12th October 2026
Happy Thanksgiving to our clients and partners in Canada.
The dollar starts the week near its strongest level in 18 months after four weekly gains in a row, and the reason behind that rise matters. US borrowing costs and expectations for another Federal Reserve rate rise have eased from their peaks, yet the dollar has kept climbing. A big part of the story is the euro, which makes up more than half of the Dollar Index and has been dragged lower by concerns over France. Wednesday’s US inflation figures will show whether the dollar can keep rising without that help.
Sterling has benefited against the euro, with GBP/EUR ending last week around 1.18, even as GBP/USD slipped to a fourth weekly loss. With UK growth figures on Thursday, a long list of central bank speeches and the UK Budget just over two weeks away, there is plenty that could move the pound from here.
Market recap from last week
USD: The dollar rose for a fourth straight week, with the Dollar Index reaching its highest level since April 2025. The weak US jobs report on 2 October briefly cooled things, and markets now see only around a 20% chance of a Fed rate rise this month. Even so, the dollar has kept strengthening, with analysts pointing to euro weakness rather than US rates as the main driver. The Fed itself still signals another rise before year end.
EUR: The euro fell for a fifth week in a row, ending near 1.12 against the dollar, close to its lowest level since May 2025. The pressure is coming from France, where the budget deficit is heading toward 5.4 % of GDP and political gridlock is making it difficult to agree a 2027 budget. The extra interest France pays to borrow compared with Germany has widened to levels last seen in 2011. MUFG says large investors have been rebuilding bets against the euro and sees no obvious positive trigger that could turn sentiment around before the end of the year.
GBP: GBP/USD slipped to 1.3224 on Friday, a fourth weekly loss, finishing just below its long term average near 1.3240, and is trading up slightly this morning. Against the euro the picture is much better, with GBP/EUR up around 0.9% since the start of October. MUFG expects the Bank of England to raise rates on 5 November, which should help the pound against the euro, though it warns the UK Budget on 28 October could test sterling’s appeal.
AUD: The Australian dollar is trading just below 0.70 against the US dollar. Markets expect another RBA rate rise but are split on when it will come, with November, December and February all seen as possible. As a result, the Aussie has been following the dollar and the euro rather than setting its own direction.
Key events this week
Monday: US, Canada and Japan holidays; speeches from Bank of England, ECB and Fed officials Tuesday: RBA meeting minutes; Fed’s Waller speaks; US bank earnings begin Wednesday: US inflation (CPI); ECB President Lagarde speaks; Fed Beige Book Thursday: UK GDP; Australian jobs; US producer prices and retail sales Friday: Bank of England Governor Bailey and Fed Chair Warsh speak early UK time
What to watch
US inflation/Wednesday This is the main event. Headline inflation is expected to rise to between 3.6 and 3.7 percent, with core inflation around 2.4 to 2.5 percent. A hotter result would revive bets on another Fed rate rise and could push the dollar higher. A softer number raises the question of whether the dollar can keep climbing without help from euro weakness.
Eurozone/France still in focus ECB President Christine Lagarde speaks on Wednesday, and markets will be watching closely for any signal on how the ECB views the French situation and what it means for future rate moves. With EUR/USD already near 17‑month lows, even a small shift in tone could move it quickly.
Sterling UK GDP/Thursday UK GDP is expected to show a slight contraction of 0.1 percent in August after 0.4 percent growth in July. A weaker number could ease expectations of a November Bank of England rate rise, while a stronger result would support the pound. Governor Bailey speaks early on Friday after saying last week that he is sceptical of firm promises about future rates.
Australian dollar jobs data/Thursday Around 20,000 new jobs are expected, with unemployment forecast to stay at 4.6 percent. The bigger test comes later this month with Australian inflation on 28 October, just ahead of the RBA’s next meeting on 3 November.
Oil/a wildcard Tensions rose over the weekend after Iran backed Houthi attacks on Saudi Arabia, including a deadly strike on Riyadh’s airport. Hopes of an energy ceasefire between Russia and Ukraine, which could bring more Russian diesel to market, offer some offset.
Rainstone Insight
With US inflation on Wednesday, UK growth figures on Thursday and the UK Budget looming and a possible Bank of England rate rise still to come, this is a week where timing could matter more than usual. If you have USD payments due, Wednesday afternoon is the key moment. If you are moving euros, France remains the main driver of recent euro weakness, and analysts see no obvious turnaround yet. Sterling has been strong against the euro lately, but moves like this can reverse quickly, particularly around the Budget. Whatever currency you are dealing in, it’s a good time to keep an eye on the market rather than assume things will stay still.
If you would like support with your international payments, get in touch with the Rainstone team. We are watching the markets closely, so you do not have to.