The US Federal Reserve (Fed) is widely expected to hike its benchmark rates by another 75 basis points (bps) yet again in the new month.

However, how high the US central bank can ultimately raise interest rates would depend on the state of the economy, of which the jobs data is a key indicator.

After dominating the FX space throughout 2022, the dollar’s reign could be coming to an end.

Since the start of Q4, dollar bulls have been missing in action as investors bet the Federal Reserve will slow the pace of rate hikes in the face of slowing economic growth.

European markets edged cautiously higher on Tuesday as investors digested upbeat corporate earnings and news that Rishi Sunak would replace Liz Truss as U.K. prime minister.

Euro bulls are desperate for any form of solace from the rampant US dollar.

The world’s most-popular FX pair, EURUSD, has endured 5 consecutive months of declines. In fact, EURUSD has only managed one monthly gain so far in 2022, which was back in May.

The week ahead promises to be incredibly eventful for financial markets thanks to a potent cocktail of corporate earnings, central bank meetings, and key economic reports.

The GBPUSD on the D1 time frame was in a down trend until 26 September when a possible last lower bottom was recorded at 1.03516. Prices that low was just too good to be true for the bulls and they started buying into the price weakness.

A sense of caution returned to markets on Wednesday as concerns over soaring inflation and slowing economic growth punctured risk sentiment. King dollar drew strength from the negative vibes while sterling weakened after UK inflation hit double digits. In the commodity space, oil prices edged cautiously higher thanks to bullish signals but gold tumbled with bears eyeing $1615. With the economic calendar relatively light today, markets could be influenced by corporate earnings and other key themes influencing sentiment.

Asian shares rose on Tuesday, tracking the positive overnight cues from Wall Street as global sentiment improved. Robust corporate earnings coupled with normality returning to UK markets following the mini-budget saga has rekindled investor risk appetite. In Europe, stock futures point to a higher open along with US markets. Given how the economic calendar is relatively light this week, sentiment may be driven by earnings with Goldman Sachs and Netflix under the spotlight later in the day.

The last few weeks have been wild for sterling as political chaos haunted investor attraction towards the currency. A toxic combination of uncertainty, confusion, and repeated U-turns on the government’s mini-budget coupled with central bank intervention placed sterling on a chaotic rollercoaster ride! After collapsing to an all-time low back in late September, prices have rebounded but remain in a downtrend.

*Update: A few hours after the report was written, Kwasi Kwarteng was sacked the chancellor of the Exchequer*

Sterling has been explosively thanks to the ongoing drama revolving around the government’s mini-budget and Bank of England (BoE).