Euro strengthens against dollar while sterling steadies ahead of BoE decision

The euro advanced against the US dollar on Monday, November 2, while the British pound recorded modest gains as investors prepared for a busy week of central bank decisions, US employment data and the midterm elections.

The dollar's recent weakness offered support to both currencies, although concerns over French government finances continued to limit the euro's recovery.

Price overview

EUR/USD traded near $1.1199 during Monday's European session, up approximately 0.37%.

GBP/USD hovered around $1.3402, gaining approximately 0.09%, while EUR/GBP advanced toward £0.8347, up approximately 0.16%.

ECB outlook supports euro

The European Central Bank maintained its main refinancing rate at 2.65% last Thursday, leaving investors focused on whether persistent inflation will require another increase in December.

However, concerns over France's public finances intensified after Fitch revised the country's credit outlook to negative.

The development weighed on sentiment toward European government bonds, limiting the euro's gains despite the weaker dollar.

Sterling awaits Bank of England decision

The Bank of England will announce its monetary policy decision on Thursday, November 5, with investors anticipating another interest rate increase.

Persistent British inflation has strengthened expectations of further tightening, although policymakers remain concerned about slowing economic activity and elevated government borrowing costs.

US elections weigh on dollar

The dollar remained under pressure ahead of Tuesday's US midterm elections, with investors assessing the potential consequences of changes in congressional control for fiscal policy and financial regulation.

Friday's US employment report could also influence expectations for another Federal Reserve rate increase in December.

Market outlook

The euro faces resistance near $1.1215, with support around $1.1150.

Sterling could test $1.3450, while immediate support stands near $1.3380.

The Bank of England's decision and the US election results are likely to determine the currencies' direction later this week.