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Sterling could come under pressure ahead of Thursday's rate decision.
A 0.1% contraction for the UK economy in October sent the pound lower by roughly half a cent against its key rivals, beginning Monday at a two-week low against both the euro and the US dollar. Part of that was a reaction to economic fragility. The bigger factor was that it virtually guaranteed a change in policy when the Bank of England meets on Thursday, at least according to currency markets.
The only thing standing in the way of another quarter-point cut is fresh inflation data. Even then, it would have to take something truly shocking to force policymakers into playing grinch.
It’s a busy old week for economic data before we head into the traditional festive season lull. There’ll be another insight into how the British economy is faring when manufacturing and services data arrive tomorrow. Retail sales for the black Friday period then follow.
US dollar watchers can rejoice that the long-anticipated glut of data has finally arrived. Tuesday alone features non-farm payrolls, unemployment and retail sales data. Delayed inflation data should arrive on Thursday, assuming it isn’t cancelled again.
For the euro, a low-key last decision of the year from the European Central Bank (ECB) might prove less impactful than the schedule of new economic data. There’s always the chance the ECB might spring a surprise, but German manufacturing and consumer reports are the centre of attention for now.
Russia’s central bank has filed a lawsuit against European financial depository Euroclear. After political manoeuvring, Euroclear froze Russian sovereign assets in order to fund new loans to Ukraine. Russia said it would “unconditionally challenge” the legality of that decision.
And there were warnings that this season’s mega-flu outbreak might overwhelm the National Health Service. Flu admissions reached record levels for this time of year to end last week. Health secretary West Streeting said the virus and potential strikes by junior doctors could cause the system to collapse.
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GBP: Risking a recession
Economic growth has taken on an almost mythical quality in the last few months. Going back to July, monthly output reads: -0.1%, -0.1%, 0%, and -0.1%. The pound fell ahead of the expected rate cut and a better end to the year is required if the economy is to escape a technical recession.
GBP/USD: the past year
EUR: Intrigue to return in 2026
2025 has been a strong year for the euro. Significant gains over the pound and the euro have been facilitated by economic resilience and a stable monetary policy outlook. Next year might bring a change on that front, although there seems to be more chance of rate hikes than cuts at present, a trend that could further support the single currency.
GBP/EUR: the past year
USD: Jobs the market mover
The big talking point for the US dollar has been the labour market. Unemployment hit a four-year high in September and is projected to have surged higher still in October. With a busy schedule of data tomorrow afternoon, you can expect the US dollar to move quickly.
EUR/USD: the past year
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