Daily Forex Pulse — October 23, 2026

FX OVERVIEW

French sovereign stress and Middle East escalation dominated, weighing on the euro and lifting energy-related risk premia, while risk aversion produced mixed support for traditional havens. Sterling outperformed on expectations of BoE tightening and fading Fed hike bets; the dollar’s direction was less uniform, with euro weakness and safe-haven demand offset by reduced US rate expectations.

MAJOR PAIRS

EURUSD — French fiscal anxiety and a record 177.7bp OAT-Bund spread, alongside a 5.06% French 10-year yield, kept the pair under pressure near 1.1210 despite potential ECB tightening. The bias remains bearish below 1.1257; support is at 1.1105 and 1.0905, while a spread break above 200bp would risk a sharper euro repricing.

EURGBP — UK activity data contrasted with weak Eurozone momentum, taking the pair to a 17-month low near 0.8360. The bias remains lower while UK rate expectations outpace the ECB’s and French fiscal risk weighs on the euro.

GBPUSD — Sterling drew support from UK inflation—3.5% headline and 2.8% core—and expectations of a BoE hike to 4% on November 5, while reduced Fed hike bets weighed on the dollar. The bias is modestly bullish above 1.3356; a break below 1.3325 would undermine it, with resistance near 1.3407.

USDJPY — September core inflation rose to 2.1% year-on-year, but the BoJ’s cautious stance leaves policy support for the yen limited. The pair is expected to remain within 155.00–160.00 absent a stronger risk-off shock; a break below 155.00 is the key downside risk.

USDCHF — The pair rebounded from 0.8200 as oil-driven inflation concerns and weaker relative yields offset the franc’s usual safe-haven appeal. A sustained move above 0.8230 would favor further gains toward 0.8275 and 0.8315; a reversal below 0.8230 would expose 0.8185 and 0.8150.

USDCAD — The pair extended a six-session decline and remains below key short- and medium-term averages, with 1.3732 and 1.3481 as downside levels. The technical bias is bearish, although the US-Canada growth gap—2.5% versus 1.2% in the IMF outlook—and rate differentials remain counterweights.

USDCNY — The PBOC set the fixing at 6.7180, slightly stronger than the previous 6.7195, signaling a preference to resist rapid yuan depreciation. The fixing was still weaker than market expectations, so it points to managed stability rather than an unambiguous near-term yuan bullish signal.

USDKRW — The won gave back early gains as oil and technology-market volatility drove risk aversion, despite the BoK’s hawkish bias and support from exports. Resistance is at 1,335 and 1,343, with support at 1,320; the near-term approach is to sell rallies, but avoid chasing moves amid volatile risk sentiment.

CENTRAL BANK WATCH

  • BoE: Strong inflation and activity data have reinforced expectations of a November 5 hike to 4%. Weak September retail sales—a 0.4% monthly decline—complicate the outlook and make guidance on further tightening important for sterling.
  • BoJ: Inflation above the 2% target strengthens the case for further tightening, but the Bank remains cautious. Markets see limited odds of an October move and a greater chance of a December hike.
  • ECB: A final December hike to 2.75% is projected by Commerzbank economists, conditional on financial stability. The ECB’s inability to use the TPI for France amid the excessive-deficit procedure leaves it constrained as sovereign spreads widen.
  • BoK: Held its policy rate at 3% as expected, while retaining a tightening bias and describing the won as undervalued.
  • PBOC: Set a slightly stronger yuan fixing than the prior day, indicating resistance to rapid depreciation.

MACRO DRIVERS

  • French fiscal risk is the euro’s main vulnerability: the 10-year yield reached 5.06% and the OAT-Bund spread widened to 177.7bp, raising concerns about contagion across the currency union.
  • Middle East escalation lifted energy prices and risk premia: disruption concerns around the Strait of Hormuz pushed Brent above $110, complicating the outlook for energy importers and supporting safe-haven demand unevenly.
  • Policy divergence favored sterling over the euro: resilient UK inflation and activity contrast with softer Eurozone PMIs and the ECB’s constraints around French sovereign stress.
  • Growth and positioning signals conflict across the dollar bloc: US growth forecasts exceed Canada’s, but USD/CAD price action remains bearish; reduced Fed hike expectations also limit broad dollar support.

POSITIONING IDEAS

  • Bullish

    • GBPUSD: UK inflation and expectations of a BoE hike support sterling, particularly while the pair holds above 1.3356.
    • USDCHF: A sustained break above 0.8230 would extend the rebound, with 0.8275 and 0.8315 as upside levels.

  • Bearish

    • EURUSD: French sovereign stress and weak Eurozone momentum keep downside risks dominant; 1.1105 is the first key support.
    • EURGBP: UK monetary-policy expectations and relative activity resilience support further downside from the 0.8360 area.
    • USDCAD: The pair’s sustained technical decline supports a short bias toward 1.3732, despite the countervailing US-Canada growth and rate differential.

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