Markets watch as US Government shutdown edges closer to a resolution
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Daily Currency Update
In the UK, recent data have underscored a sluggish growth outlook. GDP expanded by just 0.3% in Q2 2025, marking a clear slowdown from previous quarters. The Bank of England (BoE) is expected to hold its policy rate near 4% as inflation continues to ease but remains above target, and the labour market stays tight. BoE officials continue to stress the delicate balance between persistent inflation pressures and weak growth, keeping markets wary.
The euro has traded in a narrow range despite shifting global risk sentiment. Optimism that the U.S. government shutdown may soon be resolved has lent some support to the dollar, keeping the euro under mild pressure. Meanwhile, the European Central Bank (ECB) has kept interest rates steady, maintaining the deposit rate around 2%, and reiterated that its current policy stance remains “appropriate,” while staying data-dependent. Recent ECB commentary indicates that inflation is nearing the 2% medium-term target, though policymakers remain cautious about growth risks ahead.
The U.S. dollar has held firm, supported by comments from Federal Reserve officials reaffirming that any rate cuts will depend on incoming data. The economy continues to show resilience, which has tempered expectations of aggressive easing. Softer labour or inflation data could renew talk of rate cuts and weigh on the dollar, while stronger numbers or a hawkish tone from the Fed are likely to provide renewed support.
Key Movers
The upcoming release of the ZEW Economic Sentiment Index for the euro area will be closely watched, as it provides an important forward-looking measure of investor confidence. Recent readings have shown softening sentiment (22.7 in October vs 26.1 in September), weighing on the euro. A stronger-than-expected result could lift the euro on renewed optimism, while a weaker print may keep downside risks in play.
In the UK, markets will monitor for unscheduled comments from BoE officials that could move sterling. Attention will also be on upcoming UK data releases, including labour market figures, business sentiment, and real-time economic indicators from the ONS. Stronger data - such as surprise gains in employment or services PMI - could push expectations for BoE rate cuts further out, supporting the pound. Weaker numbers, however, may revive bets on earlier easing, putting pressure on GBP.
Across the Atlantic, investors will watch US economic data (including jobless claims and housing figures) and a series of Fed speeches and Treasury auctions. Robust data highlighting labour market or inflation resilience could strengthen the dollar by dampening rate-cut expectations. Conversely, softer data or dovish Fed remarks could weigh on the greenback.
Expected Ranges
- GBP/USD: 1.3100 - 1.3150 ▲
- GBP/EUR: 1.1325 - 1.1375 ▲
- GBP/AUD: 2.0120 - 2.0170 ▲
- EUR/USD: 1.1540 - 1.1590 ▲