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FX markets enter the week of 9th November on steadier footing following a frenetic run of central bank meetings and the US midterm elections. Attention now turns to a series of key growth and inflation releases. Sterling starts the week on the front foot, supported by a hawkish Bank of England and a draft UK-EU trade agreement. The Euro remains under pressure, weighed down by a lack of economic data and persistent French fiscal concerns. Meanwhile, the Dollar has stabilised following a volatile week, supported by resilient employment figures and a rotation into dollar cash amid the technology sell-off.
Monetary policy expectations across the three major economies are increasingly focused on December. The Bank of England has already raised rates to 4.00% and signalled further increases, while the Federal Reserve is now widely expected to raise rates on 9 December, with markets pricing the probability at around 75%. The ECB, meanwhile, is also edging towards a potential move of its own. For FX markets, this leaves incoming economic releases particularly influential, with each having the potential to reinforce or unwind current expectations.
The week's focus centres on three key data releases: Tuesday's US CPI, where another elevated reading could strengthen expectations of a December Fed hike; Thursday's UK third-quarter GDP, expected to show growth accelerating to 0.7%; and Friday's eurozone flash GDP figures. Elsewhere, the technology sell-off, pressure in French bond markets and the implications of the Democratic sweep remain important wildcards for currency markets.
GBP/USD Range last week: 1.3341 - 1.3502
Sterling enjoyed broad support last week, buoyed by a combination of domestic monetary policy and encouraging trade developments. An early boost came as British and European negotiators reached a draft agreement to reduce red tape across agri-food supply chains, which investors welcomed amid hopes that improving UK-EU relations could provide a meaningful boost to economic growth. Sentiment strengthened further following the Bank of England's latest rate decision, with the Monetary Policy Committee voting 8-1 to raise Bank Rate by 25 basis points to 4.00%. The sole dissenter favoured an immediate half-point increase. This hawkish split was accompanied by a notably firm tone in the accompanying guidance, with policymakers warning that domestic inflation could reach 5% by mid-2027 and signalling that further tightening remains a possibility.
Thursday's preliminary third-quarter GDP figures are the week's key domestic release. Growth is expected to have accelerated to 0.7%, up from 0.5% in the second quarter. A reading in line with or above expectations would reinforce the Bank's more hawkish outlook and potentially provide Sterling with further support.
A speech from Governor Bailey on Monday gets the week underway and could influence Sterling if his comments reinforce the Bank's hawkish position. September industrial production and trade figures are also due on Thursday, while several other BoE policymakers are scheduled to speak throughout the week.
GBP/EUR Range last week: 1.1965 - 1.1996
The Euro endured a mixed week, holding just below its recent lows against a stronger Pound while managing to avoid steeper losses elsewhere. It initially found support from its strong inverse correlation with a weakening Dollar, helping to cushion the impact of downwardly revised PMI figures during the first half of the week. However, the picture became more mixed towards Thursday and Friday. Encouraging eurozone data provided some support for the single currency, but a recovering Dollar limited its upside, leaving the Euro struggling to make meaningful gains.
The monetary policy outlook is increasingly tilted towards further action. Having held rates steady in October, the ECB is now considering a possible December move, with President Lagarde emphasising that a series of incoming economic indicators will determine whether further tightening is warranted. Markets continue to price in around 18 basis points of tightening next month, an expectation that is likely to remain in place unless a more significant equity market correction changes the outlook.
The economic calendar is relatively light, leaving the Euro particularly exposed to external drivers, chiefly movements in the Dollar and ongoing fiscal concerns surrounding French government bonds. Friday's preliminary third-quarter GDP estimate is the week's main release, while German trade figures are due on Monday.
EUR/USD Range last week: 1.1131 - 1.1273
The Dollar swung sharply last week, driven largely by the fallout from the US midterm elections. It initially slumped after a "blue tsunami" handed the Democrats control of both chambers of Congress, fuelling concerns over political gridlock, tighter regulation of the technology sector and the potential impact on US growth. However, the reaction proved short-lived. Growing concerns over the prospect of tougher AI regulation triggered a sharp sell-off in technology stocks, reviving demand for traditional safe havens and allowing the Greenback to recover its earlier losses. The rebound extended into Friday following a stronger-than-expected non-farm payrolls report, which showed the US economy adding 165,000 jobs and unemployment falling to 4.1%, further reinforcing expectations around the Fed's next move.
These figures have strengthened the case for a December rate hike. Markets are now pricing in around a 75% probability of a quarter-point increase on 9 December, and it would likely take a significant downside surprise in the incoming data to challenge that outlook.
Tuesday's October CPI release is the week's key event. Another acceleration in inflation would further cement expectations of a December hike and provide additional support for the Dollar. Producer prices follow on Friday, alongside a series of Fed speakers, while jobless claims and existing home sales are due on Thursday. Bond markets will also be closed on Wednesday for Veterans Day, although equity markets will remain open.
Important Data Releases
Monday: UK BoE Governor Bailey speech (5:25pm), AUD Westpac Consumer Confidence (11:30pm)
Tuesday: UK BRC Like-For-Like Retail Sales (12:01am), China Trade Balance (3am), US CPI (1:30pm), CAD BoC Summary of Deliberations (6:30pm)
Wednesday: German HICP Final (7am), EU ECB President Lagarde speech (9:45am)
Thursday: UK GDP Q3 (7am), US Initial Jobless Claims (1:30pm), EU ECB President Lagarde speech (7:30pm)
Friday: French CPI Final (7:45am), EU GDP Q3 (10am), EU Employment Change Q3 (10am), US PPI (1:30pm)
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