Forex Today: Focus shifts to geopolitics ahead of the weekend

Here is what you need to know on Friday, October 20:

Safe-haven flows started to dominate the financial markets early Friday with investors shifting their attention to geopolitics ahead of the weekend. The US economic docket will not feature any high-tier data releases and market participants will pay close attention to comments from Federal Reserve (Fed) officials before the blackout period begins this Saturday.

Fed Chairman Jerome Powell acknowledged on Thursday that higher bond yields were producing tighter financial conditions and noted that they could have implications for the monetary policy. When assessing the policy outlook, "the task of balancing too much tightening vs. too little is complicated by a range of uncertainties," Powell told the Economic Club of New York. These cautious comments made it difficult for the US Dollar (USD) to outperform its rivals in the American trading hours and the US Dollar Index closed in negative territory before going into a consolidation phase below 106.50 early Friday.

In a televised speech on Thursday, US President Joe Biden said that he will ask Congress to approve extra funding to aid Israel. Citing a person familiar with the matter, Reuters reported that the funding would total $14 billion. Even if there is broad support in the Senate for Biden's funding plan, a legislation cannot be passed while the US house is yet to approve a permanent speaker. Following these developments, the bond selloff continued on Thursday and the yield on the 10-year reference hit 5% for the first time since 2007. In the European morning, the 10-year retreated below 4.95%.

EUR/USD climbed to a fresh weekly high above 1.0600 on Thursday but lost its bullish momentum early Friday. At the time of press, the pair was moving up and down in a narrow channel above 1.0550.

Retail Sales in the UK declined by 0.9% on a monthly basis in September, the UK's Office for National Statistics reported on Friday. This reading followed the 0.4% increase recorded in August and came in worse than the market expectation for a decrease of 0.1%. Meanwhile, in an interview with Belfast Telegraph on Friday, Bank of England Governor Andrew Bailey said that he expects a 'marked fall' in inflation next month. GBP/USD came under bearish pressure in the European morning and was last seen trading in negative territory at around 1.2100.

USD/JPY continues to trade dangerously close to 150.00 on Friday. Bank of Japan (BoJ) Governor Kazuo Ueda said earlier in the day that they must carefully watch the moves in the FX market and their impact on Japan's economy, prices.

Gold continued to find demand as the go-to safe haven asset and extended its impressive rally to reach its highest level in three months, above $1,980.