All eyes on Bank of England and ECB rate decisions

The euro has recently been influenced by a combination of steady ECB policy expectations and mixed eurozone economic data. Inflation remains close to the ECB’s 2% target, reinforcing the Governing Council’s message that rates are likely to remain on hold for now. Comments from ECB policymakers have continued to stress a data-dependent and cautious approach, which has helped limit volatility in the single currency. Broader market sentiment and relative central bank expectations, particularly against the pound and the dollar, have also played a key role in shaping recent euro price action.

For the US, the next 24 hours will be driven by key economic data releases and comments from Federal Reserve officials. With a high degree of uncertainty already priced in, the dollar is likely to respond to nuances in inflation and labour market signals rather than any clear shift in policy direction. Recent USD moves reflect a complex mix of labour market data, Fed messaging, and broader macro signals that have left the policy outlook ambiguous. November payrolls showed a rebound in job creation alongside a rise in the unemployment rate, partly reflecting distortions from the prolonged government shutdown and underscoring underlying labour market uncertainty. Meanwhile, Fed officials have offered mixed signals on policy, with some cautioning against further rate cuts due to still-elevated inflation, while others appear more open to a less restrictive stance, creating a nuanced backdrop for dollar pricing.