Euro Pressured by France, Yen Near 158.5

3 numbers frame the picture: the dollar index near 102, the 10-year yield near 5.15%, and about an 84.5% chance the Fed holds in October.

Date: October 20, 2026 | EUR/USD · GBP/USD · USD/JPY | Horizon: weekly | Read time: 5 min

Markets opened the week of October 19 with the dollar steady near 102 on the index, after it ended last week lower and snapped a four-week winning streak. By the close on Monday the dollar leaned firmer as the US 10-year yield rose to about 5.15%.

What happened?

Fed Chair Kevin Warsh did not signal an imminent move on rates during the IMF meetings in Bangkok. Rate-hike bets for October faded: CME FedWatch shows about an 84.5% chance of a hold, after the odds of a hike briefly jumped to about 44% following last week's hot inflation print.

US annual inflation stands at 3.7%, well above the 2% target, so the market does not expect easing soon. The Fed meets on October 27 and 28, with the decision due around 9 PM Cairo time on the 28th.

“A hold is the most likely outcome in October, but the decision still hangs on inflation data and Warsh's tone.”

Why is the market moving?

• The Fed: Warsh's cautious tone cut the odds of a hike, but high inflation keeps policy restrictive.
• Yields: The 10-year yield near 5.15% supports the dollar and widens the yield gap with Japan.
• France: Cost-of-living protests triggered a sell-off in French bonds and stocks and pushed the euro toward 1.1190 in London. Harmonised inflation in France was 3.4% in September.
• Japan: BoJ Governor Kazuo Ueda said long-term yields are likely to rise as short-term rates go up. Finance Minister Satsuki Katayama warned that authorities are ready to intervene in the currency market.
• UK: Sterling is supported by stronger-than-expected growth and by market pricing for a Bank of England hike at its November 5 meeting.

Technical reading

EUR/USD closed at 1.1213, down about 0.1%, after touching 1.1190 in the morning. GBP/USD closed at 1.3304 after bouncing from an 11-month low near 1.3140. USD/JPY rose to 158.54, its high of the day.

▲ Bullish: EUR/USD: a close above 1.1270 (the 20-day average) opens the way toward 1.1325.

▼ Bearish: EUR/USD: a break below the 1.1200 floor puts 1.1150 and then 1.1088 in focus.

▲ Bullish: GBP/USD: a daily close above 1.3343 supports a move toward 1.3370.

▼ Bearish: GBP/USD: support sits at 1.3302 then 1.3264; a break retests 1.3194.

▲ Bullish: USD/JPY: analysts watch the 160 level; the risk of Japanese intervention rises as price nears it.

Watchlist

• 10-year yield: further gains support the dollar and weigh on the yen.
• France: how the protests develop and their effect on bond yields and the euro.
• Europe and UK data: flash PMIs and UK inflation figures.
• The Fed: October 27–28, then the Bank of Japan and the Bank of England on November 5.

What does it mean for traders?

• Correlation: EUR/USD and GBP/USD often move together against the dollar, so holding both doubles exposure to one decision.
• Event timing: Spreads widen and slippage becomes more likely around the Fed decision and French news.
• Leverage: Reduce position size ahead of major events and set a stop loss in advance.
• Japan: Japanese intervention can cause a sharp move in USD/JPY within minutes.