On Tuesday, the euro and the British pound rose against the dollar, and the move had nothing to do with economic data. German figures matched forecasts, the market barely reacted to the US data, and remarks by New York Federal Reserve president John Williams, which weakened the US currency's position, were the main trigger.

The final German inflation reading was not a surprise. Headline consumer prices rose 3.3% year-on-year in September versus 2.9% in August, the highest since December 2023; month-on-month dynamics and the harmonized index matched expectations exactly. Since the market already knew this, there was no reason to revise views on European Central Bank policy, and the euro did not react to the release.

The US data set was mixed but broadly decent. The NFIB small-business optimism index was 97.9, just under the 98.0 forecast. ADP weekly employment rose 24.8k, so the labor market remains steady without accelerating. The housing sector looked best: existing-home sales rose to 3.99 million, beating the 3.95 million forecast.

Normally such prints would support the dollar — steady employment and a recovering housing market reduce the odds of a sharp economic slowdown. But the reaction was muted because the market focused less on the raw numbers and more on what they imply for the Fed's rate path. And the main signal came not from the tables but from Williams' interview.

Williams said he considers one more rate hike this year appropriate but currently sees no grounds for additional tightening after that and does not expect the Fed will need to tighten policy in 2027. He emphasized he still sees disinflationary forces as tariff effects and the energy shock fade and the labor market is not overheated. "This is not an overheating economy," said John Williams, president of the New York Fed. The problem for the dollar is that markets had priced a December hike plus two more moves in 2027 — so a softer view from one of the Fed's key officials reduces the attractiveness of US yields.

This deeper outlook pressured the dollar. Treasury yields eased slightly, and two-year notes gave back three basis points, reducing the dollar's interest-rate advantage. The euro and the pound benefited, gaining a chance to recoup some losses; those who bet on further dollar strength lost. I believe the muted reaction to the US data further confirms that the market is focused not on past data but on Fed-policy expectations.

That does not mean dollar pressure will be sustained. Beth Hammack and Lorie Logan have already signaled that returning inflation to 2% will take more than one step, so the Fed is not unanimous. In my view, Wednesday's US CPI report will decide which interpretation prevails. Soft prints will validate Williams's view and let the euro and pound hold their gains, while strong inflation will restore some of the dollar's positions. The euro remains more vulnerable because of France's fiscal problems, so I expect its recovery to be less confident than the pound's.

Regarding the current technical picture for EUR/USD, buyers now need to take the 1.1215 level. Only then can they target a test of 1.1240. From there, a move toward 1.1275 is possible, but achieving that without support from large players will be difficult. On the downside, I would expect serious action from major buyers only around 1.1185; if no one shows up there, it would be better to wait for a break of the 1.1155 low or to consider long positions from 1.1125.

Regarding the current technical picture for GBP/USD, pound buyers need to take the nearest resistance at 1.3280. Only then can they target 1.3310, above which a breakout will be difficult. The furthest upside target is the 1.3340 area. On the downside, bears will try to take control of 1.3255; if they succeed, a range breakout would deal a serious blow to bulls and push GBP/USD down to 1.3235, with the prospect of extending to 1.3215.