The U.S. dollar faced a number of challenges yesterday following the release of weak manufacturing data. However, remarks from Federal Reserve representative Austan Goolsbee, President of the Federal Reserve Bank of Chicago, helped ease the pressure.

The policymaker stated that he wants to see more data before deciding how to vote at the December central bank meeting but warned that he is currently more concerned about inflation than the labor market. "I haven't made a decision ahead of the December meeting," Goolsbee said Monday in an interview with Yahoo Finance. "I'm concerned about inflation, since it has been above the target for four and a half years, and the trend is not favorable."

This rhetoric, which generally aligns with recent Fed statements, helped reduce fears of a possible monetary policy easing. Investors worried about a potential slowdown in economic growth were somewhat reassured by the Fed's continued emphasis on fighting inflation. Goolsbee emphasized that a premature retreat from the hawkish stance could harm long-term price stability and, consequently, the broader economy.

Nevertheless, uncertainty remains. The market continues to closely monitor upcoming economic indicators, especially inflation reports and labor market data, which have been absent for over a month due to the government shutdown. The December central bank meeting promises to be one of the most important events of the year, potentially having a significant impact on currency market dynamics and overall financial stability. Until then, volatility is likely to remain elevated, reflecting the ongoing tension between recession fears and the need to contain inflationary pressure.

It's worth recalling that policymakers, including Goolsbee, voted to cut the key interest rate by a quarter percentage point at their October 28–29 meeting. This marked the second consecutive rate cut in an effort to support a weakened labor market. At the post-meeting press conference, Chair Jerome Powell warned that another rate cut at the December meeting—something markets had been counting on—was not a given. Some officials are increasingly concerned that inflation, running at 3% year-over-year, is not falling quickly enough toward the Fed's 2% target, and that a strong economy could reignite price pressures.

At the end of the interview, Goolsbee added that he still believes interest rates could "come down quite significantly," but that it would be most prudent for rates to decline in tandem with inflation.

As for the current technical outlook for EUR/USD, buyers now need to focus on reclaiming the 1.1540 level. Only then can the pair target a test of 1.1580. From there, it could climb toward 1.1610, although doing so without support from major players would be rather difficult. The furthest upside target stands at 1.1640. In case of a decline, I expect significant buyer activity only around 1.1500. If no strong demand appears there, it would be better to wait for a renewal of the 1.1460 low or look for long positions from 1.1430.

As for the current technical outlook for GBP/USD, pound buyers need to reclaim the nearest resistance at 1.3160. Only then can they target 1.3190, above which it will be quite difficult to break through. The furthest target lies around 1.3220. In case of a drop, bears will attempt to regain control around 1.3130. If they succeed, a breakout of this range could seriously damage bullish positions and push GBP/USD down to 1.3095, with the potential to reach 1.3060.