Unemployment ticks surprisingly higher in the US to 4.3%
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Daily Currency Update
Business growth in the UK has almost stalled this month, with retail sales weakening in October and household sentiment dropping sharply. The data underscores the difficult backdrop for the government ahead of the Budget. Although borrowing figures came in worse than expected, they’re unlikely to influence the upcoming proposals at this late stage. The timing of the Budget also dampens the growth outlook into next year, adding pressure on the Bank of England to continue cutting interest rates.
Since Friday, the euro has slipped modestly against major currencies, partly due to stronger US data and fading expectations of near-term rate cuts from the European Central Bank. ECB Vice-President Luis de Guindos noted that euro-zone growth is “better than expected” and that current interest rates remain “appropriate,” while President Christine Lagarde warned that the region’s export-driven model is reaching its limits and called for a stronger focus on domestic demand.
In the US, the Fed finally received updated economic data following the government shutdown, with the latest report showing an unexpected rise in unemployment. Markets reacted quickly, now pricing in a higher probability of a third and final rate cut this year—73.3%, up from 39.1% the day before. However, Federal Reserve messaging remains mixed: New York Fed President John Williams signalled rates could still be cut soon, whereas Dallas Fed President Lorie Logan argued for holding steady while assessing the economic impact.
Key Movers
The euro is likely to remain steady unless we see a surprising economic data release or a noticeable shift in tone from the European Central Bank. If ECB speakers emphasise sticky inflation or growing risks to the economy, the euro could gain as markets lean toward a more hawkish stance. Conversely, if the tone is relaxed on inflation and cautious on growth, or if sentiment indicators disappoint, the euro may soften. Keep an eye on any standout PMI or sentiment numbers and remarks from ECB officials for the market-moving moments.
For the week ahead, the outlook for the British Pound is tilted toward cautious. Key focus will centre on the UK Autumn Budget and the forthcoming commentary from the Bank of England, which could influence market expectations around fiscal and monetary policy. Soft recent UK data has already weighed on sterling and raised bets on possible rate cuts, underscoring the fragility of the UK economy. A surprisingly hawkish tone or firmer-than-expected results in budget or data could bolster sterling, while weak outcomes or dovish signals will likely keep it under pressure.
Looking ahead, the U.S. dollar appears poised for modest strength as markets await key data and commentary from Federal Reserve officials. With data releases on jobs, inflation and labour-market metrics expected this week, the dollar could gain if the numbers show resilience supporting expectations that the Fed will hold off on further rate cuts. Conversely, if the data disappoints or Fed speakers signal a more dovish outlook, the dollar may soften. For now, this week’s outcome looks likely to hinge on both the economic releases and the tone adopted by policymakers.
Expected Ranges
- GBP/USD: 1.3100 - 1.3150 ▲
- GBP/EUR: 1.1350 - 1.1400 ▲
- GBP/AUD: 2.0245 - 2.0295 ▲
- EUR/USD: 1.1520 - 1.1570 ▲