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FX markets enter the week of 2 November facing an exceptionally dense run of event risk, with the US midterm elections, a Bank of England decision and a wave of top-tier data all crowded into a few short sessions. The Majors sit in contrasting positions: Sterling has rallied to its strongest levels since mid-September, buoyed by a well-received Autumn Budget, while the Euro remains hostage to the fiscal and political turmoil in France. GBPUSD is trading around 1.3418 and GBPEUR near 1.1975, a fresh multi-month high, with the Pound firm on both crosses. EURUSD, by contrast, hovers near 1.1195 as French debt fears and softer German data keep the single currency subdued.
The policy picture remains strikingly divergent. The Bank of England is widely expected to lift rates to 4.0% on Thursday, though it may temper the hawkish bets that have built up for 2027. The Federal Reserve, having held last week, is seen moving again in December, with markets placing the odds of a quarter-point hike at around three in four. The ECB, meanwhile, looks to be edging towards its own December move as eurozone inflation climbs. For FX markets, this split leaves every incoming release capable of shifting the relative rate calculus between pairs.
Against that backdrop, the week turns on its set-pieces. Tuesday’s US midterms carry clear Dollar risk should a Democratic sweep stoke fears of gridlock, while Thursday’s BoE decision makes Sterling’s guidance-driven reaction binary. Wednesday’s eurozone inflation and Friday’s US payrolls offer further flashpoints, with France’s bond crisis a persistent source of volatility throughout.
GBPUSD Range last week: 1.3273 - 1.3432
The Pound climbed to its best levels since mid-September last week, with the Budget proving the decisive turning point. Sterling spent the first half of the week on the defensive as investors trimmed exposure ahead of Chancellor Healey’s first fiscal statement, wary of his tax and spending plans and the limited headroom at his disposal. The mood shifted sharply once he reached the dispatch box, however, as markets welcomed a measured, unprovocative package. By pairing targeted relief for businesses and households with a clear commitment to respect long-term borrowing rules, Healey avoided unsettling debt markets, though the Office for Budget Responsibility’s sharp downgrade to 2027 growth capped the upside. Gilt yields fell back over the rest of the week, with the 10-year dropping to a one-month low and clearing the path for a solid Sterling recovery.
Thursday’s Bank of England decision is the week’s defining event. A 25bp rise to 4.0% is widely anticipated and all but fully priced, so the guidance will matter more than the move itself. A hawkish steer that keeps further tightening in play could add fresh momentum, while any pushback against market bets on more than four hikes over the coming year would leave the Pound exposed.
Beyond the BoE, final October PMIs round out a light domestic calendar, leaving Sterling also sensitive to the US payrolls report and midterm fallout.
GBPEUR Range last week: 1.1896 - 1.2014
The Euro struggled for direction last week, unable to shake off the fiscal and political strains emanating from France. It firmed briefly at the start as Germany’s Ifo business climate index posted a larger-than-expected improvement, reaching its best level since May 2023, but lingering worries over France’s debt crisis and civil unrest quickly reasserted themselves. Easing French yields offered a brief reprieve midweek, only for softer German consumer confidence to stifle the recovery. The single currency then came under fresh pressure around the European Central Bank meeting, where President Lagarde announced she would step down in February. Even a stronger-than-forecast third-quarter GDP print on Friday failed to help, with the Euro weighed down by its negative correlation to a firmer Dollar and renewed French fiscal anxiety.
The policy backdrop is tilting towards further action. Having held the deposit rate steady in October, the ECB is now seen as gearing up for a possible December move, with markets pricing in around a 63% chance, as inflation continues to climb.
Wednesday’s flash eurozone inflation reading is the week’s key release, with a rise towards 4% expected and a firmer reading likely to lend the Euro some support. Final PMIs, German factory orders and eurozone retail sales fill out the calendar, though persistent French fiscal fears could keep gains in check.
EURUSD | Range last week: 1.1153 - 1.1216
The Dollar had a mixed week, firming at the outset before giving back ground around the Fed. It drew early support from easing concerns over the AI sector and a cautious mood ahead of a busy data slate. Wednesday’s Federal Reserve decision was the centrepiece: the hold itself surprised no one, but the Greenback softened afterwards as Chair Warsh struck a measured tone and stressed the need for more data before committing to a path. Trade turned choppy thereafter, with a stronger-than-expected third-quarter GDP print offset by renewed AI jitters and mounting uncertainty ahead of the midterm elections.
The policy picture still points to a December move. With the Fed on hold for now, markets are pricing in around a 76% chance of a quarter-point hike on 9 December and fully discount at least two increases over the coming year. It would likely take a notably weak jobs print to shift that calculus.
The week ahead is dominated by two events. Tuesday’s midterm elections are a clear risk, with a Democratic sweep seen as mildly Dollar-negative given the scope for gridlock and further strain on AI sentiment. Friday’s non-farm payrolls are the other focus, with another soft reading potentially denting December hike bets. ISM manufacturing lands Monday, JOLTS Tuesday, ADP and ISM services Wednesday, and jobless claims Thursday.
Important Data Releases
Monday: CAD Manufacturing PMI (2:30pm), US ISM Manufacturing PMI (3pm), US Senior Loan Officer Survey (7pm)
Tuesday: AUD RBA Interest Rate Decision (3:30am), US Midterm Elections (all day), CHF CPI (7:30am), US JOLTS Job Openings (3pm), NZD Employment & Unemployment Rate (9:45pm)
Wednesday: China Services PMI (1:45am), EU HICP Flash (10am), US ADP Employment Change (1:15pm), US ISM Services PMI (3pm)
Thursday: AUD Trade Balance (12:30am), German Factory Orders (7am), EU PPI (10am), UK BoE Interest Rate Decision (12pm), US Initial Jobless Claims (1:30pm)
Friday: German Industrial Production (7am), EU Retail Sales (10am), CAD Employment Change (1:30pm), US Nonfarm Payrolls (1:30pm), US Average Hourly Earnings (1:30pm), US Unemployment Rate (1:30pm), US Michigan Consumer Sentiment (3pm)
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