Monday 20th October 2025
Pound Gains Ground but Growth Woes Cast a Shadow
Last week, Cable ended on a strong note, posting solid gains that brought it closer to reclaiming the 1.35 level lost at the start of the month. The pair has opened on a steady footing, hovering just above the 1.34 mark.
Meanwhile, GBP/EUR registered a more modest gain, positioning to start the week around 1.15. Despite these positive movements, the Pound remains under broader pressure, with gains over the past six months remaining limited against its major counterparts.
The outlook remains cautious as official data confirmed that UK economic growth slowed during the summer months. The economy expanded by just 0.1% in August, while July’s figure were revised down to 0.1%, following a 0.4% rise in June, ultimately signalling a sharp loss of momentum. The slowdown places additional pressure on Chancellor Rachel Reeves ahead of the November 26th budget, where she is expected to unveil a fresh round of tax increases to address the mounting fiscal challenges.
USD Under Pressure as Shutdown Drags and Bank Concerns Resurface
The ongoing federal government shutdown has now become the third-longest in US history, with little sign of resolution as senators have failed for the tenth time to break the legislative impasse. Although the USD has not experienced a sharp decline, the prolonged shutdown – set to reach the three-week mark on Wednesday – continues to weigh on sentiment, particularly as the flow of key government data remains suspended.
Adding to the Dollar’s challenges, concerns over the health of regional banks have resurfaced. Warnings of potential fraud at two US regional banks triggered a global sell-off in banking shares. Zions Bancorp tumbled 13% after reporting a $50 million charge-off tied to a California Bank & Trust loan, while Western Alliance Bancorp fell 11% due to its exposure to the same borrowers.
While these developments are not yet indicative of systemic risk, they have revived uncomfortable memories of the early stages of the 2008 financial crisis. Overall, the Dollar’s outlook remains fragile, with the DXY index down more than 0.5% over the past five days.
French Political Relief Lends Fresh Momentum to the Euro
EUR/USD begins the week on a firmer footing, building on a modest gain that positions the pair around the 1.165 level. The Euro’s resilience comes as Europe continues to navigate a mix of challenges, from central bank policy uncertainty to domestic political tensions in France.
However, momentum shifted late last week following French Prime Minister Sébastien Lecornu’s survival of two no-confidence votes on Thursday. His decision to suspend pension reforms until after the 2027 presidential election – prioritising political stability over fiscal discipline – helped calm markets and eased investor concerns about political fragmentation in the Eurozone’s second-largest economy.
A more stable French government will most likely lend additional support to the Euro, potentially strengthening the bloc’s position as it faces a comparatively fragile US economy.
This Weeks Market Moving Data
For the third consecutive week, key market-moving data from the United States remains on hold as the federal government shutdown extends into its third-longest stretch in history. However, it’s important to note that the S&P Global PMI release will still go ahead, marking the first major US data release of the month. With no resolution to the shutdown in sight, investor attention is shifting toward developments in the UK and Europe, with Friday shaping up to be a key day for market direction.
21-22 October 2025
ECB President Lagarde’s Speech: Lagarde the leader of the European Central Bank will deliver a speech regarding monetary policy and will be offering insights into future policy direction.
22 October 2025
UK Consumer Price Index Release: The UK Consumer Price Index (CPI) is a key indicator of inflation that directly influences the Bank of England’s monetary policy decisions. A higher-than-expected CPI reading typically strengthens the Pound, as it raises expectations for interest rate hikes to control inflation.
24 October 2025
UK Retail Sales Data Release: The UK Retail Sales data is a great economic indicator of consumer spending as it measures the volume of sales of goods by retailers directly to end customers. A strong reading is generally seen as bullish for GBP, while a weak weeding is seen as bearish.
German Release Of HCOB PMI Release: On Friday, Hamburg Commercial Bank (HCOB) will release its latest Purchasing Managers’ Index (PMI) data, offering key insights into the health of Europe’s largest economy, Germany. The focus will be on the manufacturing and services sectors, which form the core of this closely watched report.
General Eurozone Release Of HCOB PMI Release: On Friday, the HCOB will offer a release of the latest Eurozone PMI data as a collective, providing a key snapshot of economic activity across the region’s manufacturing and services sectors.
USA S&P Global PMI Release: The S&P Global PMI release will go ahead as scheduled, despite the government shutdown, as it is compiled and published by S&P Global, a private organisation independent of federal operations. As the first major US data release of the month, it will be closely watched by traders.
