Global Forex Overview: Dollar Weakens, Pound and Euro Gain Momentum

Forex investors are focused on comments from officials regarding monetary and trade policies. Recently, Federal Reserve Board member Steven Miran stated that rising trade tensions between the U.S. and China are worsening economic prospects, signaling the need to reduce borrowing costs. He added that inflation acceleration is currently less concerning than the risk of a global economic downturn. Meanwhile, President Donald Trump openly acknowledged that the U.S. is engaged in a “trade war” with China and claimed the national economy would have been defenseless without additional import sanctions. Treasury Secretary Scott Bessent emphasized that the government will not change its position in negotiations with Chinese counterparts despite the recent stock market decline. He also noted that China has forced foreign competitors out of the rare-earth metals industry and strengthened its dominance in refining and processing, calling for the creation of a national strategic reserve of mineral resources. The latest Federal Reserve Beige Book indicated that overall economic activity and the labor market remain stable, though recent data show rising layoffs and weaker household spending.

Eurozone

The euro is gaining against the U.S. dollar and the yen but weakening versus the pound.

Investors focused on comments from acting Governor of the Bank of Slovenia Primož Dolenc, who said the European Central Bank (ECB) should keep borrowing costs unchanged unless new economic shocks occur. Earlier, proponents of further monetary easing argued that inflation could fall below the 2.0% target in the medium term, given political instability in France and weaker regional GDP growth, while Chinese firms facing higher U.S. tariffs might sell excess goods in the EU. However, Dolenc believes that price pressure and economic growth are currently balanced and that changing interest rates would disrupt this equilibrium. As a result, the ECB is likely to maintain its current policy settings at least until the end of the year.

United Kingdom

The pound is strengthening against major competitors — the U.S. dollar, the yen, and the euro.

Markets are watching August GDP data: the economy grew by 0.1% month-over-month after a –0.1% decline previously, while annual growth slowed from 1.5% to 1.3%. Analysts warn that the upcoming autumn budget, which includes significant tax increases, could weigh on business activity and, together with U.S. trade tariffs, may trigger a severe economic slowdown. August industrial production rose by 0.4% month-over-month (vs. 0.2% expected) but fell by 0.7% year-over-year (vs. –0.6% forecast), reinforcing expectations of potential monetary easing by the Bank of England.

Japan

The yen is declining against the pound and the euro but shows mixed performance versus the U.S. dollar.

Data released today showed core machinery orders fell 0.9% month-over-month in August (vs. –0.4% expected) but rose 1.6% year-over-year (vs. 4.8% forecast). Naoki Tamura, a Bank of Japan board member, urged the central bank to raise rates closer to a “neutral” level (around 1.00%) due to growing inflationary pressure. He added that despite uncertainty in global trade, the slowdown might be less severe than initially expected. Tamura stressed that gradual tightening now would help avoid drastic measures later.

Australia

The Australian dollar is weakening against the euro and the pound but remains mixed versus the yen and the U.S. dollar.

Investors are focusing on September labor market data: employment rose by 14.9K after –11.8K previously (vs. +20.5K forecast). Full-time employment increased by 8.7K after –48.6K, while unemployment climbed from 4.3% to 4.5%, the highest in four years. The data boosted expectations for further monetary easing by the Reserve Bank of Australia (RBA). The probability of a rate cut at the November meeting now stands at 72%, up from 40% earlier.

Oil

Oil prices are attempting a mild pullback, but the overall market remains stable as investors react to comments from President Donald Trump.

Trump said that Indian Prime Minister Narendra Modi assured him that India would stop buying Russian oil. However, Indian officials later clarified that their policy aims to maintain stable energy prices and reliable supplies, contradicting Trump’s claim. The Kremlin also expressed confidence that its energy partnership with New Delhi will continue. Analysts believe that any restrictions on Russian oil purchases would come only from specific Indian refineries. Later today, at 20:00 (GMT+2), the U.S. Energy Information Administration (EIA) will release weekly inventory data. Forecasts point to a 0.3M barrel increase in crude stocks, which could put additional pressure on oil prices.