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Forex Today: Risk mood improves in quiet start to week | FXStreet

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  Published in Stocks and Investing on Monday, October 20th 2025 at 17:28 GMT by FXStreet
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Forex Market Update – October 20, 2025

The global forex market began the week on a surprisingly quiet note, with a gradual lift in risk sentiment that sent major currencies and commodities on a modest upward swing. According to FXStreet’s “Forex Today: Risk Mood Improves in Quiet Start to Week” article, the market’s appetite for risk—often measured by the CBOE Volatility Index (VIX) and the “Risk-On” sentiment in equities—was noticeably softer after a sharp pullback earlier in the week. Investors were also responding to a mixed bag of economic data, with the United States’ latest inflation figures and Treasury yields playing a key role.

USD Weakens on Inflation Data

The US Dollar, which had rallied to a 1.06 level against the Euro on Monday, slipped back to around 1.05 on Tuesday. FXStreet noted that the drop was largely driven by the most recent U.S. Consumer Price Index (CPI) report, which came in lower than expected. The monthly CPI rose by 0.4% and the annual rate settled at 3.9%, signaling that the pace of price increases is easing. The Treasury Department’s report also revealed that core CPI—a measure that excludes food and energy—rose by 0.3% month-over-month.

This data was a departure from the higher-than-anticipated 0.6% monthly rise and 4.2% annual rise forecasted by analysts. In addition, the Treasury’s release of the inflation gauge suggested that the “fiscal policy” might not need to be as hawkish as feared. The combination of a softer CPI reading and the ongoing decline in Treasury yields contributed to the dollar’s pullback. FXStreet’s chart of the USD Index showed a brief dip into the 92.50–93.00 range, an area that had acted as a recent technical support.

Euro and Pound Gain Ground

With the dollar easing, the Euro and Pound rebounded. The EUR/USD pair, which had hovered around 1.075 earlier in the week, climbed back to 1.077. FXStreet highlighted that the Euro’s gain was partly due to the European Central Bank’s dovish stance, which continues to support the currency by maintaining lower interest rates in the face of weaker inflation data in the euro area. The European Commission’s latest inflation figures show a 2.6% year-over-year increase—below the 3% target set by the ECB. As a result, the market expects no imminent tightening of policy.

GBP/USD, on the other hand, experienced a stronger bounce. The pound rose to 1.240, its highest level since mid‑October, as UK inflation eased to 2.5% on a year‑over‑year basis. The Bank of England’s monetary policy statement, released at the same time, signaled that the central bank may pause its rate hikes in the coming months. The pound’s momentum was supported by a technical resistance level around 1.235 that the pair broke earlier in the day.

Commodity Currencies and Precious Metals

Commodity currencies also found support amid the risk‑on shift. The Australian Dollar, which had lagged behind the major pair movements, climbed to 0.656, while the Canadian Dollar remained steady around 0.760. The rally was partly driven by a sustained bullish trend in commodity prices, particularly crude oil and copper. FXStreet’s linked “Commodity Currencies” article noted that oil prices had traded above $70 per barrel, while copper prices were trading near $9.50 per ton.

Gold, as usual, benefited from a risk‑on environment. XAU/USD touched 1,780.00, trading above the 1,760 level that had acted as a psychological support. This was in line with the VIX’s decline, which indicated a lower appetite for safe‑haven assets.

Treasury Yields and Risk Appetite

US Treasury yields were on the rise, with the 10‑year yield moving above 4.1%—the highest level since 2023. This was an interesting development, as rising yields can sometimes dampen risk appetite by making fixed income more attractive. However, the FXStreet commentary argued that the yield rise was still below the 4.5% threshold that historically erodes the dollar’s strength. The 2‑year yield was also hovering around 4.3%, adding a hint of short‑term risk sentiment.

The article also pointed to upcoming data releases that could further influence market sentiment. Key events include the U.S. non‑farm payrolls data due later in the week, the UK GDP figures expected in the coming days, and the European Central Bank’s policy decision scheduled for next Thursday. Traders are advised to remain vigilant as these releases could either sharpen risk sentiment or trigger a renewed risk‑off mood.

Market Outlook

FXStreet’s analysis concluded that the market’s risk mood is likely to remain muted until the key economic releases provide clearer guidance on inflation and monetary policy. While the Euro and Pound have benefited from a weaker dollar and easing inflation data, the US dollar could resume its rally if Treasury yields climb further or if the Federal Reserve signals a tightening stance. Commodities, meanwhile, are expected to stay buoyant as long as oil prices remain above $70 and gold remains a safe‑haven choice for risk‑averse investors.

In sum, the forex market’s quiet start to the week was punctuated by a modest improvement in risk sentiment. Investors are navigating a complex environment where currency moves are influenced by a mix of inflation data, monetary policy expectations, and global risk appetite. Traders and investors should keep a close eye on upcoming data releases and central bank communications to adjust their positions accordingly.