What Determines Currency Movements at the End of 2026
By the end of October, the US dollar maintains a strong position on Forex. On the morning of October 28, the DXY dollar index was around 102.40 points, near a two-week high. The American currency is supported by stable US economic indicators and expectations of maintaining a tight monetary policy by the Federal Reserve.
The next event for the market will be the Fed's decision on October 28. Investors expect the rate to remain in the range of 3.75–4.00%, but the further dynamics of the dollar will depend on the regulator's signals regarding the December meeting. The next Fed decision is scheduled for December 9.
The forecast for currency rates by the end of 2026 is determined by several interrelated factors:
Interest rate differentials. Higher yields on financial instruments can increase the attractiveness of a national currency, although the direction of the exchange rate also depends on expectations of future decisions.
Inflation and economic growth. CPI, PCE, GDP, and employment data influence interest rate forecasts and capital movements.
Government bond yields. Changes reflect expectations for rates, inflationary, and budgetary risks.
Commodity prices. Oil is especially important for the Canadian dollar, while the Australian currency is sensitive to demand for commodities from China.
Investor risk appetite. Increased uncertainty can shift capital to safe-haven assets, including the dollar and the Japanese yen.
For traders, not only economic indicators are important, but also their deviation from market expectations. Even a rate hike can cause a currency to weaken if traders have already priced in such a decision and expected a more hawkish tone.
EUR/USD — Can the Euro Recover Against the Dollar
On the morning of October 28, the EUR/USD pair was trading around 1.1130, remaining under pressure from the strengthening dollar. Additional negative factors include budgetary risks of European countries, high energy costs, and uncertainty about the economic growth of the eurozone.
Investors are particularly focused on France's public finances. The widening spread between French and German bond yields indicates an increased risk premium demanded by market participants.
The next catalyst will be the European Central Bank meeting on October 29. For EUR/USD, not only the interest rate decision will matter but also the assessment of inflation, lending, and economic activity prospects.
The technical outlook for the euro remains negative. The pair is near local October lows, but approaching oversold territory increases the likelihood of a short-term recovery. However, a rebound alone does not confirm a change in the downward trend.
The EUR/USD forecast by the end of the year primarily depends on differences in expectations regarding Fed and ECB rates.
Growth scenario. Softer Fed signals or slowing US inflation could support the euro. The first target will be a recovery above 1.1200, followed by the 1.1280 area. With a sustained reversal, attention may shift to 1.1400.
Decline scenario. Maintaining a hawkish Fed stance and deteriorating eurozone economic indicators could increase pressure on the pair. Breaking support around 1.1116 would create conditions for a decline to 1.1050.
These levels reflect the nearest technical benchmarks, not guaranteed targets for December. A more convincing signal of a trend change would be a consistent hold of EUR/USD above resistances supported by fundamental factors.
USD/JPY — How Strong Can the Yen's Recovery Be
As of October 28, the USD/JPY pair was trading near 158 yen per dollar. The main factor supporting the US currency is the significant interest rate differential between the US and Japan, making dollar instruments attractive for carry trade strategies — earning income from the interest rate differential.
However, further weakening of the yen is not the only possible scenario. The Bank of Japan is gradually tightening monetary policy, and inflationary pressure provides grounds for additional rate hikes. The next decision by the Japanese regulator is expected on October 30.
The yen's dynamics are also influenced by energy prices. Japan relies on oil and gas imports, so rising prices increase importers' costs and may boost demand for foreign currency.
An additional risk is associated with possible currency interventions. As USD/JPY approaches the psychological mark of 160, investor attention to statements by Japanese authorities intensifies. However, this level is not an official intervention threshold: authorities primarily consider the speed and nature of exchange rate fluctuations.
The USD/JPY forecast remains sensitive to U.S. bond yields, Bank of Japan policy, and intervention risks.
Bullish scenario. If the Fed maintains a hawkish stance and U.S. bond yields remain high, consolidation above 158.00 could set the stage for a move to 159.00 and then to 160.00.
Bearish scenario. Stronger signals from the Bank of Japan, a decline in U.S. yields, or increased likelihood of interventions could bring the pair back to support around 157.00.
When trading USD/JPY, it is important to consider the heightened risk of sharp fluctuations. Currency interventions can be accompanied by widening spreads and slippage, so even a protective stop order does not guarantee execution at the set price.
GBP/USD — what will happen to the pound after the UK budget
The British pound is under pressure from a strong dollar and domestic economic risks. As of the morning of October 28, the GBP/USD pair was trading around 1.3310. Upcoming market events include the UK budget release on October 28 and the Bank of England meeting on November 5.
The main uncertainty is related to the state of the UK's public finances. If the budget implies a significant increase in borrowing without convincing sources of funding, investors may demand higher yields on UK bonds.
However, rising yields do not necessarily strengthen the pound. If they reflect concerns about the sustainability of government debt, the national currency can decline alongside falling bond prices.
For GBP/USD, the difference in policy between the Bank of England and the Fed is also important. A more hawkish stance by the UK regulator could support the pound, while expectations of rate easing will increase pressure, all else being equal.
The technical picture remains predominantly negative. The pair is below the 1.3400 area, which acts as important near-term resistance, while the 1.3300 area is seen as the nearest support.
The GBP/USD forecast for November and December will depend on investor reactions to the UK budget and further decisions by the Bank of England.
Bullish scenario. Reducing budget uncertainty and a more hawkish Bank of England policy could support the pound. For an improved technical picture, a sustained consolidation above 1.3400 is needed.
Bearish scenario. Increased concerns about government debt and continued demand for the dollar could lead to a break below 1.3300. In this case, the next target would be the 1.3150 area.
An additional trading signal may come from the relationship between GBP/USD dynamics and UK bond yields. A simultaneous decline in the pound and rising yields could indicate increased budget risks rather than increased attractiveness of UK assets.
AUD/USD — will high inflation help the Australian dollar
The Australian dollar shows relative resilience amid the strengthening U.S. currency. As of October 28, the AUD/USD pair was around 0.7033 following the release of fresh inflation statistics from Australia.
According to the Australian Bureau of Statistics (ABS), annual inflation accelerated to 4.3% in September from 4.0% the previous month. For the third quarter, consumer prices rose by 1.3%, and the trimmed mean core inflation reached 3.6% annually. Both annual figures exceed the Reserve Bank of Australia's (RBA) target range of 2–3%.
High inflation strengthens the case for maintaining a tight RBA policy or an additional rate hike. The next regulator meeting is scheduled for November 3, so AUD/USD may be particularly sensitive to changes in market expectations.
However, the Australian currency is influenced not only by domestic indicators. China remains a key trading partner for Australia, and a slowdown in Chinese industry could reduce demand for iron ore and other export goods.
Another factor is the global risk appetite of investors. During periods of heightened uncertainty, the Australian dollar may weaken even with a relatively high interest rate.
The AUD/USD forecast is determined by a combination of expectations for RBA policy, the outlook for the Chinese economy, and commodity price dynamics.
Bullish scenario. Hawkish signals from the RBA, steady demand for commodities, and a weakening U.S. dollar could help consolidate above 0.7040. The next short-term target would be 0.7060.
Bearish scenario. Deterioration in Chinese statistics, falling commodity prices, or a strengthening dollar could push the pair below the 0.7015–0.7027 area. In this case, attention would shift to 0.6995.
For AUD/USD traders, the opportunity to compare several independent factors is of interest: Australian inflation, RBA rate expectations, and Chinese economic activity. The convergence of signals can increase the credibility of a trading scenario, but does not guarantee its realization.
USD/CAD — how the oil market and rates will determine the Canadian dollar's course
As of October 28, the USD/CAD pair was trading around 1.4020. The Canadian dollar remains sensitive to oil prices, interest rates, and the state of the U.S. economy, which remains Canada's main trading partner.
The Canadian currency is traditionally classified as a commodity currency because the oil and gas sector plays an important role in the country's economy. Rising oil prices can improve export revenues and support the Canadian dollar, but the dependence is not constant. The exchange rate is simultaneously influenced by interest rate differentials, trade risks, and global demand for the US dollar.
On October 28, the Bank of Canada is expected to announce its rate decision and present its quarterly monetary policy report. Investors will assess forecasts for inflation, consumer demand, and economic growth. The next meeting of the regulator is scheduled for December 9.
The trade relations between the US and Canada also hold additional significance. Changes in American demand, external trade conditions, and economic activity can impact Canadian exporters and the national currency.
From a technical perspective, the 1.4000 area remains an important psychological benchmark. Previously identified resistances at 1.4034 and 1.4060 need to be evaluated considering subsequent price changes: they do not form a single zone but represent separate short-term levels.
The USD/CAD forecast depends on the interest rate differential between the US and Canada, oil dynamics, and further decisions by the two central banks.
Growth scenario. A softer stance by the Bank of Canada, a decline in oil prices, or strengthening of the US dollar could support a move above 1.4034. The next technical benchmark will be 1.4060.
Decline scenario. Stronger signals from the Canadian regulator and rising oil prices may support the Canadian dollar. Holding USD/CAD below 1.4000 will create prerequisites for a decline to 1.3970.
To confirm scenarios, it is useful to compare USD/CAD movements with WTI oil prices and the yield differential between US and Canadian bonds. If these indicators provide opposing signals, the likelihood of unstable pair movement increases.
Comparison of Five Currency Pairs
The forecast for currency pairs by the end of 2026 shows that the Fed's policy remains a common factor for all five instruments, but the further dynamics of each depend on their own economic drivers. Fundamental analysis allows for the assessment of the reasons behind currency movements, while Forex technical analysis helps identify the nearest price benchmarks and conditions for trend changes.
Currency Pair | Current Trend | Main Driver | Condition for Pair's Rise | Condition for Pair's Fall |
|---|---|---|---|---|
EUR/USD | Downward | Fed and ECB Policy | Easing Fed Signals | Weak Eurozone Economy and Strong Dollar |
USD/JPY | Moderately Upward | US and Japan Rate Differential | High US Bond Yields | Tightening by Bank of Japan or Intervention |
GBP/USD | Downward | UK Budget and Bank of England Policy | Reduction in Budget Risks | Worsening Debt Expectations |
AUD/USD | Consolidation with Growth Potential | RBA and Commodity Demand | Tight RBA Policy and Stable Chinese Demand | Weak Chinese Statistics and Strong Dollar |
USD/CAD | Consolidation around 1.4000 | Oil and Bank of Canada Policy | Falling Oil Prices and Strong Dollar | Tight Bank of Canada Policy and Rising Oil Prices |
Main Driver
The presented trends characterize the short-term situation at the end of October, not a guaranteed direction of rates until December. For forming a trading strategy, it's important to consider changes in fundamental conditions and confirmation of movement by technical signals.
What Events Could Change the Forecast by Year-End
After the October series of meetings, the currency market's attention will shift to November's macroeconomic statistics and December's regulatory decisions.
Key events in the coming months:
November 3 — Reserve Bank of Australia decision.
November 5 — Bank of England decision.
December 8 — Reserve Bank of Australia meeting.
December 9 — Fed and Bank of Canada decisions.
December 17 — ECB and Bank of England decisions.
December 18 — Bank of Japan decision.
The Fed meeting on December 9, accompanied by an update of economic forecasts, will be particularly important. These will allow assessing the regulator's leaders' expectations regarding future rates, inflation, and economic growth.
Between meetings, currency pair volatility may increase amid publications of CPI, PCE, employment, and business activity data. Traders should consider not only the dates of statistical releases but also the deviation of actual figures from consensus forecasts.
Which Currency Pairs Deserve Special Attention
The Forex forecast for November and December 2026 largely depends on the decisions of the Federal Reserve, however, individual economic factors may lead to significant differences in the dynamics of currency pairs.
EUR/USD remains sensitive to the divergence of policies between the Federal Reserve and the ECB, while USD/JPY is influenced by U.S. bond yields and the risk of currency interventions. For GBP/USD, the UK's fiscal policy is an additional source of uncertainty. AUD/USD and USD/CAD allow tracking the impact of commodity markets and decisions of national central banks.
When choosing a trading strategy, it is important for investors and traders to combine fundamental indicators with technical signals, consider upcoming macroeconomic events, and apply risk management. The coincidence of several independent factors increases the validity of the forecast but does not eliminate the possibility of adverse market movements.
The data and trading scenarios are relevant as of October 28, 2026, prior to the publication of decisions by the Federal Reserve and the Bank of Canada. The specified technical levels are short-term guidelines, not guaranteed price targets by the end of the year. The material is informational and analytical in nature and is not an individual investment recommendation.
