US data coming back on stream
The euro managed to advance against the dollar last week notwithstanding the market paring back expectations for a cut in US interest rates at next month’s Fed meeting, though it did finish off its best levels of the week (circa $1.1660) and is trading just north of $1.16 this morning. Sterling underperformed, ending largely unchanged against a generally softer dollar at just over $1.3150, and dipping by half a penny to about £0.8825 against the pound, as concerns about the outlook for the UK public finances resurfaced at the end of the week. Expectations for a cut in interest rates at the Bank of England’s December meeting remained intact though, ahead of UK inflation data (for October) due this Wednesday. US economic data starts to come back on stream this week following the end of the government shutdown. The September payrolls report is published on Thursday, which will shape expectations for the Fed’s December monetary policy meeting, with the market currently seeing a slightly less than 50% chance of a rate cut next month.
UK government borrowing costs jumped on Friday following reports than the Chancellor was abandoning plans to raise income tax rates in next week’s budget, with both 10- and 30-year bond yields rising by around 15bps. US bond yields drifted up over the course of last week, ending around 5bps higher across the curve, while German yields broadly followed suit.
Having opened sharply lower on Friday, US equity markets recovered to end largely flat on the day. The S&P 500 and Dow Jones eked out small gains for the week overall, while the Nasdaq shed around half a percent. European stocks fell for a second session running on Friday but still advanced by more than 2% on the week.
Employment in the Euro area continued to creep higher in Q3 2025, increasing by 0.1% from Q2, alongside continued modest growth in GDP, which was confirmed at 0.2% q-o-q in Q3. The unemployment rate in the zone has levelled off in a range of 6.2%-6.4% recently, which is a still a multi-decade low.
Looking to the week ahead, as well as the inflation and employment reports in the UK and US mentioned above, flash PMIs for November are published in the main economies on Friday. The Fed publishes the minutes of its October meeting on Wednesday, while a large number of Fed members are also scheduled to speak over the course of the week.