Euro and sterling weaken as dollar strengthens ahead of Fed decision

The euro and British pound declined against the US dollar on Tuesday, October 27, as investors turned cautious ahead of the Federal Reserve's monetary policy decision, with persistent inflation concerns supporting the greenback.

Both European currencies remained under pressure following Monday's losses, although expectations of further interest rate increases in Europe and Britain limited the decline.

Price overview

The EUR/USD pair traded around $1.1159 at 07:17 GMT, down 0.13%.

The GBP/USD pair stood near $1.3323 at 07:15 GMT, falling 0.16%.

Euro faces pressure ahead of ECB meeting

The euro extended its decline as investors prepared for the European Central Bank's policy announcement later this week.

The eurozone's economic outlook remains complicated by elevated energy prices, which threaten to increase inflation while weakening industrial activity and household spending.

Recent business activity figures have also raised concerns about the resilience of the region's economic recovery.

The ECB is expected to maintain interest rates, although policymakers' comments on inflation could influence expectations for future tightening.

Sterling retreats amid budget concerns

The British pound weakened as investors assessed the outlook for UK interest rates and government finances.

British inflation remains elevated, strengthening expectations that the Bank of England could increase borrowing costs at its November meeting.

However, uncertainty surrounding the government's upcoming budget and the impact of higher interest rates on economic growth continued to weigh on sentiment.

Federal Reserve decision approaches

The Federal Reserve is widely expected to leave interest rates unchanged at its October 27–28 meeting.

Investors will focus on whether policymakers signal another increase in December, particularly following September's stronger inflation figures.

Market outlook

The euro faces immediate pressure near $1.1150, while a recovery above $1.1200 could improve its short-term outlook.

Sterling remains vulnerable below $1.3350, with support near $1.3300.

Both currencies could experience sharper movements following the Fed's announcement and subsequent European central bank decisions.