After Thursday, the euro and the pound held in a sideways channel despite continued pressure from the dollar, while the market focused on US rhetoric rather than European data.

For the eurozone, the main event yesterday was Germany's IFO business climate index, which rose to 89.9 from 88.8 in August — the fourth consecutive month of growth. However, the effect on the euro was short-lived, and the pair fairly quickly returned to declines.

For the UK, the pound continued falling after the clearly weak CBI retail sales for September, which printed -55 against an expected -42 — a noticeably sharper deterioration than the market had priced in.

US signals yesterday were mixed. New-home sales jumped 6.4% to 684k, although the median price fell 9.1%, while weekly initial jobless claims declined, confirming resilience in the US labor market. More important for FX positioning was John Williams of the New York Federal Reserve, who previously took a notably more cautious stance but has now publicly said he expects another rate hike before year-end. That shift in rhetoric explained yesterday's pressure on the euro and the pound far more than the housing or labor figures themselves.

Today, in the first half of the day, a moderately important European data block will be released — GfK's leading German consumer sentiment index, private-sector lending in the eurozone, and M3 money-supply dynamics. In my view, none of these indicators qualify as a strong catalyst for EUR/USD, so I do not expect substantial moves in the pair today. A continuation of trading within the existing sideways range looks more likely. The GfK index only gives a rough read on German households' sentiment, while lending and M3 figures are more useful for assessing how the private sector adapts to prior European Central Bank steps than as standalone FX drivers. I believe that in the absence of stronger signals from either Europe or the US, the pair will likely remain within the current channel until the next meaningful trigger appears.

For the pound, the market awaits a speech by Bank of England Governor Andrew Bailey in the first half of the day, which could shed light on the future path of monetary policy. However, after the central bank's recent decision to keep rates at 3.75%, a sharp change in tone is unlikely, especially since Bailey's prior public remarks have been institutional in nature and had little immediate impact on the pound.

More revealing was yesterday's speech by Deputy Governor Clare Lombardelli, who warned that a rate increase becomes more likely the longer the Middle East conflict drags on. Firms are currently absorbing higher energy costs, but their capacity is limited, and the ongoing shock increases the risk that inflationary pressure will spread across the economy. Her words matter beyond a routine committee comment because Lombardelli is seen as a key swing vote on policy. At the September 17 meeting, she sided with the majority to hold rates 6–3, although her separate remarks already noted growing arguments for tightening. If that swing vote continues to lean hawkish publicly, the next meeting risks a much narrower majority than the current 6–3.

Against this backdrop, I would watch carefully whether Bailey adopts similar rhetoric today — that, rather than a formal confirmation of an already made decision, could become a real catalyst for GBP/USD.

Momentum

For the euro, the key level above is 1.1389, a breakout of which could take the pair to 1.1414 and then to 1.1433. That scenario is realistic only with noticeably stronger-than-expected European data or an unexpectedly dovish tone from Fed speakers. For now, I consider a break below 1.1362 with targets at 1.1335 and 1.1312 much more workable, especially since Williams's rhetorical shift continues to favor the dollar.

For the pound, the upside mark is 1.3232, beyond which the pair could reach 1.3252 and then 1.3284, but that scenario would require a clearly hawkish Bailey echoing Lombardelli's signals from yesterday. A break of 1.3195 down with targets at 1.3150 and 1.3110 looks more likely if Bailey sticks to restrained, institutional rhetoric without specifics on rates.

Mean Reversion

For the euro, I'm watching the upper boundary at 1.1386. The logic is simple: the pair tries to hold above, but buyers for continuation are absent, and the price slides back — a sell signal. Given the current narrow sideways range and lack of strong drivers, this scenario seems quite appropriate. The lower reference at 1.1361 works by the opposite logic, but approach buying cautiously, since without a fresh eurozone catalyst a durable bounce is unlikely; targets for such a trade should therefore be modest.

For the pound, the upper boundary is 1.3222. The same return-pattern applies, and without a clearly hawkish tone from Bailey, a false upside breakout followed by a quick return inside looks plausible. The lower reference at 1.3197 suggests buying the rebound after a false break lower, but trading it should depend on Bailey's speech — if he is softer than expected, the bounce could be very short.