The USD remains in the driver’s seat, while the pound and euro struggle to regain footing. UK wage growth has also eased — the slowest since March 2021 — adding pressure to sterling. Catch up on today’s FX highlights and market insights in our latest blog 👇
Key Insights:
- USD continues to outperform other major currencies
- UK pay growth slows, marking its lowest rate since March 2021
Market Recap:
The US dollar strengthened through the afternoon as limited data releases—due to the ongoing government shutdown—kept attention on currency flows. The USD Index advanced around 0.4%, extending its rally to the longest stretch since late July. This renewed dollar demand pushed both GBP/USD and EUR/USD to two-month lows, breaking below key support levels.
Meanwhile, yen weakness persisted even after reassuring comments from Japan’s ruling party leader. Analysts at Macquarie Bank cautioned that markets may be overestimating the likelihood of aggressive Federal Reserve rate cuts—currently pricing in about 100 basis points of easing over the next year—given that inflation remains stubborn. Hedge funds continue to favour the USD, with ongoing softness in both the yen and euro reinforcing the greenback’s appeal.
Today's Market Watch:
The US dollar is slightly softer this morning but still tracking a 1.2% gain for the week, marking its strongest showing since November. The greenback continues to benefit as investors steer clear of other major currencies amid heightened political uncertainty overseas.
The euro has found some short-term relief, rebounding from a two-month low after President Macron ruled out calling early elections and moved to appoint a new prime minister. Still, analysts warn that the single currency could face renewed pressure if the leadership change deepens existing political divides within the eurozone.
In Japan, the yen has regained modest ground following firmer verbal intervention from the finance minister. However, ongoing domestic political strains are keeping traders cautious and volatility elevated.
The pound remains under pressure after UK wage growth slowed in September. Data from S&P Global, KPMG, and REC showed pay expansion easing to 50.2 from 50.6 in August — the slowest pace since March 2021 — with part-time wages also falling to an eight-month low. Although readings above 50 still signal growth, the trend highlights a cooling labour market that could limit support for sterling.
10th October 2025
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