Tuesday's session started calmer than Monday's, and both currencies moved higher. Overnight, the euro recovered nearly all of Monday evening's decline and rose to about 1.1235, while the pound climbed to roughly 1.3334. The dollar eased a bit, but this is not yet a clear turning point — rather the market is catching its breath ahead of a busy morning calendar.
Europe first. The main worry for the euro remains France. Protests there triggered large sell-offs in the single currency and the political picture stays tense. Opposition parties refuse to negotiate with Macron's outgoing administration ahead of 2027 elections, and early-October polls showed Le Pen and Melenchon heading to a runoff. For beginners, the key takeaway is simple: as long as political turmoil continues, investors struggle to trust the euro, and it remains vulnerable even when economic prints are good.
The pound is not directly tied to French troubles; it only feels spillovers when the entire European bloc weakens. Also, the Bank of England keeps policy at 3.75%, and this morning's UK labour-market prints will show whether the BoE has reason to delay tightening.
Now the US. Yesterday's NAHB home-builder sentiment index was weak — down 3 points to 29 in October, with buyer traffic at 18. The report's details are worrying: 43% of builders report cutting prices (the highest share in years) and 65% offer discounts or incentives. That implies expensive mortgages are cooling demand. The dollar eased at the time of the release, but that was likely a timing coincidence rather than a structural reaction — NAHB is a secondary series, and markets look primarily at inflation, Federal Reserve policy, and bond yields.
Today's main events will come from Europe and the UK. For the eurozone we'll see German producer prices, ZEW business-sentiment indices for Germany and the eurozone, and the current-account balance. Producer prices show factory-gate inflation and tend to lead consumer inflation; stronger-than-expected PPI would increase conviction that the European Central Bank must stay tight, supporting the euro. Business-sentiment PMIs and ZEW help gauge managers' confidence: improvements indicate the economy is coping with high energy costs; deterioration revives growth worries. The current-account balance reflects foreign demand for the region's goods and services; a surplus supports the euro, while a shrinking surplus weakens it. Together, these releases should set the tone for EUR/USD through the European session.
For the pound, one of the week's most substantive data sets is due. Today's releases are initial jobless claims, the unemployment rate, and average earnings. Earnings will probably be the most important because wages feed directly into inflation. When people earn more, they spend more, and companies tend to pass higher costs into prices, especially in services. If wages rise faster than expected, the BoE will find it harder to ease its stance, and sterling will get support. A weak outcome would weaken the case for keeping policy rates high. Recall that in the last reports unemployment was 4.9% and private-sector regular pay (ex bonuses) grew 2.8% — the lowest in almost six years. We will closely study any deviation from those numbers. I believe strong wages would let GBP/USD extend its rally, while weak labor data would quickly put the pair back under pressure.
For the euro, the breakout levels remain unchanged: upside 1.1234, downside 1.1193. Price is currently at 1.1235, just one pip above the upper level, so beginners need to be especially careful. One pip is market noise — it is not a confirmed breakout. I consider long positions only after a decisive close above the level that holds; then targets are 1.1268 and 1.1310. Frankly, without data to support that scenario, it's hard to believe, so I am watching the German releases. The lower level 1.1193 is far away, and a meaningful sell-off would require a strong catalyst — for example, fresh bad news from France or weaker business sentiment. In that case, targets would be 1.1156 and 1.1117.
For the pound, buy setups are above 1.3337, with targets at 1.3368 and 1.3397. Price sits at 1.3334, three pips below the level, so a first touch proves nothing. If wages are strong, a breakout looks plausible, and that is my main morning scenario. I now consider short positions below 1.3303 (previously 1.3307), targeting 1.3273 and 1.3233. That lower scenario requires weak labour-market prints.
For the euro, the reversion levels are 1.1245 and 1.1219. The upper one sits 11 pips above the breakout point at 1.1234. If price moves above 1.1234, reaches 1.1245, and then quickly falls back, I would consider selling. If it closes above 1.1245, that is a confirmed breakout, and selling there is not allowed. The lower level 1.1219 lies 15 pips below 1.1234 and 26 pips above the downside breakout point at 1.1193. Here, I look for a situation where price dips briefly below 1.1219, fails to hold, and returns; in that case, longs with a stop under the low of the false breakout are appropriate. If price stays below after the data, the reversion setup has failed.
For the pound, the upper reversion level 1.3350 is 13 pips above the buy breakout at 1.3337. If price breaks 1.3337, reaches 1.3350, and then quickly falls back, I would consider selling. If it closes above 1.3350, that is a confirmed breakout and selling is not allowed. The lower level 1.3314 sits 11 pips above the downside breakout point 1.3303, so it is closer to the current price than the breakout level. I expect a rebound here after the first reaction to the data. If price drops below 1.3314, quickly returns above, and holds, longs with a stop under the probe low are suitable. If it closes below, the reversion failed, and attention shifts to 1.3303.
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