Market Outlook November 5, 2026 Oil-Driven Dollar Selling Meets a Rebound; USD/JPY Recovers Above 158. The Bank of Eng

November 5, 2026

Oil-Driven Dollar Selling Meets a Rebound; USD/JPY Recovers Above 158. The Bank of England Is in Focus Tonight

Market Overview

The currency market has shifted from dollar selling in Tokyo to a recovery in the dollar during the London session.

After the Democratic victory in the US midterm elections and a fall in oil prices, USD/JPY declined from 158.44 early in Tokyo to 157.79. EUR/USD rose to 1.1268, and GBP/USD reached 1.3501.

At the start of the London session, the US 10-year Treasury yield recovered from the 4.84% area into the 4.87% area, helping USD/JPY rebound to around 158.10–158.20. EUR/USD and GBP/USD also came under corrective selling.

The key question today is whether dollar selling driven by lower oil prices will continue or whether a recovery in US yields will prompt further dollar buying. With the Bank of England meeting tonight and the US employment report due tomorrow, markets may struggle to move decisively in one direction.

Will Dollar Weakness Continue?

The US midterm election result has fueled expectations that the Trump administration’s fiscal expansion may be constrained, weighing on Treasury yields and the dollar. The sharp fall in oil prices has also eased inflation concerns and safe-haven demand for the dollar.

However, broad dollar selling does not necessarily mean that USD/JPY will continue to fall.

If markets welcome lower oil prices, risk appetite could prompt yen selling and limit declines in USD/JPY. In fact, the pair fell to 157.41 the previous day before rebounding to the 158.60s in the US session.

Today, yen buying emerged during Tokyo trading amid weakness in Asian equities. In London, however, a firm start for European stocks and a rebound in US yields have supported USD/JPY.

It is important to distinguish the broad direction of the dollar from yen-specific strength or weakness.

USD/JPY

USD/JPY is seeing two-way trading around 158.

To the upside, today’s Tokyo high of 158.44 is the first level to watch. The upper edge of the Ichimoku cloud is also near this area. Above it, the 200-day moving average sits near 158.65, making a break and sustained hold above this area important.

If the pair is pushed back again in the mid-158s, the move may remain a short-covering rebound rather than a sustained recovery.

To the downside, the immediate levels to watch are the 21-day moving average near 157.98, the 10-day moving average near 157.84, and today’s low of 157.79.

If the pair falls below this area and struggles to recover, the Ichimoku base line near 157.52 and the previous day’s low of 157.41 could come into focus.

USD/JPY’s recovery above 158 in London confirms that buyers remain below the market. Ahead of tomorrow’s US employment report, however, whether the advance continues will likely depend on the reaction in US yields.

Bank of England Policy Announcement

The main event today is the Bank of England’s policy announcement at 12:00 p.m. London time. Governor Bailey’s press conference is scheduled for 12:30 p.m.

The market expects a 0.25-percentage-point rate increase, from 3.75% to 4.00%. The BOE will also publish meeting minutes and its economic projections.

Since a rate increase is already priced in, attention will focus on the vote split and the bank’s stance on further increases.

A strong warning about persistent inflation and a signal that further action may be needed could support sterling. On the other hand, if the BOE emphasizes the burden on the economy or the possibility of easing inflation, sterling could fall even if rates are raised.

Oil has fallen sharply in recent days. The latest developments may not be fully reflected in the economic projections, so it will also be worth watching how the governor assesses the impact of lower oil prices during the press conference.

Pound

GBP/USD rose to 1.3501 today, then at one point fell back to 1.3465.

The rebound that began in mid-October remains intact, but profit-taking and position adjustments ahead of the BOE announcement may emerge around 1.3500.

If the BOE takes a more hawkish stance than markets expect, the key question will be whether GBP/USD can move above 1.3500 and hold there.

If expectations for further rate increases recede, the upper edge of the Ichimoku cloud near 1.3429 and the 200-day moving average near 1.3423 will be the first downside levels to watch.

GBP/JPY fell from the 213.50s in Tokyo to below 213.00. Tonight, the pound’s reaction to the BOE will coincide with moves in USD/JPY, raising the potential for sharp swings immediately after the announcement.

US Employment Data and Labor Costs

Today’s US releases provide an update on the labor market and labor costs ahead of tomorrow’s employment report.

The Challenger job cuts report is due at 10:30 a.m. London time. Initial jobless claims and third-quarter productivity and unit labor costs follow at 1:30 p.m.

Initial jobless claims are forecast at 195,000, up slightly from 194,000 previously.

A lower-than-expected reading could signal continued resilience in employment and support the dollar. A sharp increase, by contrast, could heighten caution ahead of tomorrow’s employment report, potentially weighing on US yields and the dollar.

Productivity is forecast to rise 3.0% quarter over quarter, while unit labor costs are expected to increase 1.5%. An upside surprise in unit labor costs could reinforce the view that inflationary pressures remain persistent.

Do not use today’s releases alone to predict tomorrow’s employment report. Watch whether the move in US yields continues after the data.

BOJ Minutes and the Yen

Minutes from the BOJ’s September meeting, released today, showed that some members saw a need to adjust the degree of monetary accommodation by raising rates. The minutes also recorded a view that the pace of rate increases may need to accelerate if signs of an upside inflation surprise emerge.

This supports expectations for further BOJ rate increases and could underpin the yen.

However, the minutes reflect discussions at the September meeting; they do not announce a new policy decision today. The impact of lower oil prices on Japan’s inflation outlook will also be a factor in future policy assessments.

To judge whether yen buying can persist, watch Japanese government bond yields as well as rate-hike expectations.

Oil and Equity Markets

NY crude futures fell to the 86-dollar area at one point and have since stabilized in the upper 87s.

Lower oil prices may ease inflation concerns in the United States and reduce energy costs for Japan and Europe. The response in equity markets, however, has varied by region.

In Asia, selling spread particularly across semiconductor stocks, and the Nikkei fell by more than 1,000 points. European equities, on the other hand, opened firmly, supported by lower oil prices.

If selling in US technology stocks intensifies again, yen buying could push USD/JPY lower. If equities stabilize, reduced risk concerns associated with lower oil prices could instead prompt yen selling.

Euro and Volatility Risks

EUR/USD rose to 1.1268 before slipping back into the 1.1230s during the London session.

To the upside, watch whether the pair can break above today’s high near 1.1269 and the previous day’s high near 1.1273. To the downside, the first level to monitor is the Ichimoku base line near 1.1221.

Meanwhile, one-week implied volatility for USD/JPY has fallen to 6.23%, suggesting that event-related hedging ahead of the election has eased. Demand for protection against yen strength has also declined somewhat.

That does not guarantee that actual price swings will be small. If tonight’s BOE decision or tomorrow’s US employment report differs sharply from expectations, volatility could pick up again.

Key Points for the Overseas Session

• Will the BOE raise rates to 4.00%, as expected?

• What will the vote split show, and how will the BOE signal its next policy steps?

• Can GBP/USD break above 1.3500 and hold there?

• Can USD/JPY break above 158.44–158.65?

• If USD/JPY retreats, will it hold near 157.79?

• What will US jobless claims and unit labor costs show?

• Will the recovery in US yields and dollar buying continue?

• How will lower oil prices and US technology stocks affect the yen?

Scenario

The main scenario is for oil-driven dollar selling to compete with buying prompted by the recovery in US yields, leaving USD/JPY to search for direction around 158.

If US employment-related data are strong and the rebound in yields continues, USD/JPY could test the mid-158s. Conversely, weak data combined with falling US equities could push the pair below 157.79 and bring the mid-157s into view.

The BOE decision will be the main driver for sterling. In addition to whether rates are raised, watch whether the bank’s guidance exceeds market expectations. Tonight, the initial market move could also reverse during Governor Bailey’s press conference.