Weekly Currency Round Up: Friday Update
Rainstone FX Ltd 16th October 2026
The week started with the dollar at an 18 month high and ends with it giving back some of those gains. Hotter US inflation initially supported the greenback, but concerns around AI related spending and slower economic momentum later in the week pushed investors back into government bonds and took some of the heat out of the rally. Sterling finished the week stronger after a surprise lift in UK growth, the euro recovered from a 17 month low against the dollar but stayed weak against the pound, and the Australian dollar was knocked by a surprise fall in jobs.
What moved the markets this week
USD
The dollar hit its highest level in 18 months on Wednesday after US inflation came in hotter than expected at 3.7%, with energy prices doing most of the damage. That revived talk of another Fed rate rise this month, but the gains did not last.
Concerns around AI related spending hit technology shares around the world and investors moved back into US government bonds, pushing yields lower. The dollar did not get its usual safe haven boost and gave back much of its earlier gains, even though US producer prices and retail sales both beat expectations on Thursday.
On Friday, Fed Chair Kevin Warsh declined to signal what the Fed will do at its meeting on 27 to 28 October, and markets now see a hold as much more likely.
EUR
The euro touched its lowest level against the dollar in around 17 months early in the week, with France remaining the key concern. ECB President Christine Lagarde said France needs to fix its own finances, which reduced hopes that the ECB might step in to support French bonds.
She also noted that energy costs have driven much of the rise in eurozone inflation, now around 3.8%, with limited evidence so far that those pressures are spreading through the wider economy. While some ECB policymakers still see another rate rise as a possibility, the euro recovered only modestly as the dollar eased into the weekend and remained weak against sterling.
GBP
Sterling had its best day of the week on Thursday. UK growth came in at 0.1% for August when a small contraction had been expected, helping the pound record its biggest one day gain against the dollar since mid August. GBP/USD finished the week close to 1.33.
Against the euro, GBP/EUR remained firm around 1.18. Bank of England Governor Andrew Bailey said on Friday that above target inflation is frustrating, but signs of it spreading through wages and prices remain limited for now. Markets continue to see a rate rise on 5 November as very likely, although stronger growth does not remove all the risks for the pound. BoE policymaker Huw Pill has also pushed back on how many further rises markets expect.
AUD
The Australian dollar fell to a 15 week low against the US dollar after jobs figures showed employment fell by 39,300 in September, against expectations for an increase. Unemployment rose to a five year high of 4.7%.
Markets have scaled back expectations for another RBA rate rise in November, and the Aussie also weakened against the New Zealand dollar, where another increase is still expected later this month. AUD/USD finished the week around 0.69, down almost 1%.
What to expect next week
UK inflation on Wednesday is the main event for sterling, with UK jobs figures on Tuesday and retail sales on Friday helping complete the picture.
Friday also brings business activity surveys from the UK, eurozone, Germany and the US, giving one of the clearest early indications of how companies are coping with higher energy costs. Looking slightly further ahead, the end of October remains packed with the UK Budget, Fed, Bank of Canada and RBNZ decisions, Australian inflation and the ECB all landing within two days.
Rainstone Insight
This week showed just how quickly the market can change. The dollar hit an 18 month high and then reversed. Sterling gained on one stronger growth number. The Australian dollar fell sharply after one jobs report.
With UK inflation, jobs data and business surveys all due next week, there is plenty that could move rates again. Add in the UK Budget and several major central bank decisions at the end of the month, and the final few weeks of October could be some of the most important of the year for currency markets.
Whether you are paying overseas suppliers, buying property abroad, moving savings or planning a large transfer, it is worth speaking to us before key events land. A little planning now can make a meaningful difference later.
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.