Sterling on the front foot

Sterling was a notable outperformer yesterday, advancing against both the dollar and the euro, helped by better than expected UK economic data and some softer than forecast US data. The pound has strengthened by more than a cent against the dollar to trade at around $1.3350, its best level since the end of October, and has gained around half a penny to £0.8740 against the euro, also its best level since late October. The single currency, meanwhile, has edged a little higher against the dollar, trading at around $1.1670 this morning.

There wasn’t much change in government bond yields, with US yields slightly lower on the back of softer economic data and UK and Germany  yields broadly flat on the day. Equity markets managed to eke out some further modest gains, with European stocks adding around 0.2% and the S&P 500 in the US closing 0.3% higher (and also closing in on late October’s all-time high as it continues to recover from November’s sell-off).

Economic activity in the UK in November was firmer than initially thought judging by the jump in the final PMI readings for the month. That said, the Composite PMI still dipped from October, and at 51.2 is consistent with relatively subdued GDP growth. Meanwhile, the Composite PMI for the Euro area nudged up to 52.8 last month, its highest reading in 2025 to date and pointing to a pick-up in the pace of growth in the final quarter of the year.

November’s ADP jobs report in the US was much weaker than expected. Private employment on this measure fell for a third month in four last month, declining by 32k from October. Over the three months to  November employment fell by an average of 5k a month, having increased by a fairly modest 24k a month over the three months to August.

Looking to the day ahead, economic data due include the construction PMI in the UK, retail sales in the Euro area, and weekly jobless claims in the US.