A Fed pause in October and debate among US officials have kept EUR/USD near 17-month lows — now the European Central Bank is in focus. The ECB is widely expected to keep interest rates steady today. The deposit rate should remain at 2.50% and the main refinancing rate near 2.65% — a consensus call among economists — while the bank balances the fallout from a French bond shock and renewed energy price inflation.

The pause is explained simply. Inflation in the euro area is roughly double the 2% target and could approach 4% in the near term, but the rise is concentrated in energy. That gives policymakers more time to assess whether inflation is broadening. The eurozone economy is holding up but losing momentum, and higher rates have already tightened financial conditions. So most analysts expect the ECB to pause to avoid exacerbating strains in sovereign bond markets.

The key issue for markets is a December move. Many expect a final rate hike at the December meeting when the ECB will publish updated inflation forecasts through 2028 — and some projections see rate cuts only in 2028. Skipping an October increase and moving in December would preserve a quarterly tightening tempo and signal the bank is not panicking. Christine Lagarde and her colleagues call for a "measured" approach while stressing uncertainty, noting that developments in the Middle East could change the outlook.

The scope for further tightening is limited. Raising rates much from the current levels will be difficult. Policy is already toward the upper end of estimated neutral settings, and a materially higher peak requires signs of persistent inflation outside energy — for example, sustained wage pressures. Those signals are scarce; few relevant high-frequency data points were released since the September meeting. Eurostat will publish preliminary Q3 GDP on Friday, and the largest euro area economies will report October inflation, data that markets will watch closely.

France is the flashpoint. Markets will be keyed in to Lagarde's comments on French bond volatility, which is spreading to peers like Italy. The spread between French 10-year OATs and German Bunds recently hit its widest since 2011 amid a large deficit, political fragmentation, and street protests.

Lagarde's future also remains an open question. Rumors that she might step down before her term ends persist after she confirmed she is considering leaving several months before her mandate expires next October. ECB insiders increasingly expect an announcement in January, and any early clarity would give the bloc time to select a successor.

In my view, a pause is already priced in, so the euro's reaction will hinge on Lagarde's tone. If she sticks to cautious commentary about French bonds and signals that a December hike remains possible, the euro may get a brief reprieve but remain constrained by French risks and oil. If she emphasizes the fragility of the bond market or downplays a December move, pressure on the euro will increase. My main worry is not a pause but the impression that the ECB is losing control of French sovereign markets.

As for EUR/USD technicals, buyers should look to reclaim 1.1150 to target 1.1175, with a further move to 1.1195, possible only with support from major players. On the downside, buyers should show up near 1.1130. If that fails, wait for a break below 1.1110 or consider long positions from 1.1080.

As for GBP/USD technicals, sterling buyers need to take resistance at 1.3330 to target 1.3360. This would open the way to 1.3390, but a push above that level would be challenging. If the pair falls, bears will target control at 1.3300. A break below that level would hit bulls and could push GBP/USD to 1.3270 and then 1.3240.