Thursday brought another substantial advance in the U.S. dollar as investors increasingly anticipated further Federal Reserve tightening.
The dollar reached its strongest level since April 2025, supported by rising Treasury yields and comments from Fed officials suggesting that inflation remained too persistent to justify a less restrictive policy stance.
Some policymakers indicated that a larger-than-usual increase could become necessary if inflation failed to improve.
The yen approached 160 per dollar, prompting Japanese currency authorities to renew warnings about excessive exchange-rate movements.
Meanwhile, the UK economy expanded 0.7% in the third quarter, broadly matching expectations. Despite the relatively encouraging data, sterling remained under pressure as dollar strength dominated currency markets. Reuters+2
Major Pairs Analysis
EUR/USD
Technical Analysis: EUR/USD declined toward 1.1050, extending its bearish trend. The breakdown below 1.11 reinforced selling pressure and brought the psychological 1.10 level into focus. Recovery above 1.11 would be necessary to stabilize the near-term structure.
Fundamental Analysis: The euro suffered from rising U.S. yields and increasingly hawkish Federal Reserve expectations. Although European equities benefited from lower energy prices and corporate earnings, those developments were insufficient to overcome the dollar’s interest-rate advantage. Reuters
GBP/USD
Technical Analysis: GBP/USD declined toward 1.3220–1.3250, despite relatively resilient UK economic data. The 1.32 level became an important support area, while 1.33 represented nearby resistance.
Fundamental Analysis: Britain’s 0.7% quarterly growth supported the argument that the economy could withstand another Bank of England rate increase. However, the prospect of aggressive Federal Reserve tightening and higher U.S. Treasury yields outweighed that domestic support.
USD/JPY
Technical Analysis: USD/JPY approached 160, testing a psychologically significant level associated with previous Japanese intervention. A sustained break above it could encourage further upside, but the possibility of abrupt official action increased the risk of sharp reversals.
Fundamental Analysis: Higher U.S. yields supported the dollar, while the BOJ’s comparatively gradual approach to tightening left the yen at a disadvantage. Japan’s top currency diplomat, Atsushi Mimura, warned about rapid exchange-rate movements, reminding traders that authorities remained concerned about excessive yen depreciation. Reuters
Market Outlook
The dollar entered Friday with strong momentum.
However, USD/JPY’s proximity to 160 created a particularly sensitive trading environment. U.S. producer-price data and further developments in the Middle East were likely to influence whether the dollar could maintain its gains.