Monday 1st December 2025
🇬🇧 Market Reaction and Key Takeaways from the Autumn Budget
The highly anticipated Autumn Budget finally landed after a series of leaks and mounting political-economic volatility, including an accidental early release of key forecasts by the OBR just before PMQs. Initial market reaction was negative, with both GBP/EUR and GBP/USD dipping on the announcement. However, sentiment quickly stabilised, and both currency pairs recovered into positive territory. As the new week begins, GBP/EUR is trading just above 1.14, while GBP/USD has opened at 1.32.
The OBR set the tone early by inadvertently publishing its forecasts ahead of the Chancellor’s speech. These included a 0.3 percentage point downgrade to medium-term growth projections, although higher-than-expected fiscal headroom, estimated at £22 billion by 2029/30, which provided some reassurance. The leaked Budget outlined a sizeable £26 billion tax package. Key policy measures include lifting the two-child benefit cap and introducing a new annual property tax on homes valued above £2 million from 2028. Overall, the November Budget is set to materially increase near-term revenues and push the tax burden toward 38% of GDP by 2030–31.
December FX Seasonality and Policy Expectations Drag on the USD
The US Dollar endured a poor week, with the DXY slipping below 100 again and losing further momentum. A major driver of this decline is shifting market expectations. Investors are now pricing in an 87% probability of a December rate cut, up from the previous week. With most post–government shutdown data coming in softer than expected, markets appear increasingly confident that the Federal Reserve will move in December.
Seasonality is also beginning to play a role. Crédit Agricole’s FX analysis shows that the Dollar has weakened in roughly 70% of Decembers over the past 25 years, as the currency is typically sold off during the final month of the year. This pattern is largely driven by year-end behaviour, foreign investors repatriate profits from US assets, converting USD back into their home currencies, while exporters similarly hedge and repatriate USD-denominated revenues. Given that the US dollar is the dominant global trade currency, these flows can exert notable downward pressure at year-end.
🇪🇺Inflation Concerns and Diverging Central Banks Shape Euro Outlook
The Euro begins the week with EUR/GBP edging close to the 0.88 level, while EUR/USD opens around 1.16. Inflation concerns continue to hang over the Eurozone, with price pressures expected to rise slightly ,a development that supports the ECB’s decision to hold rates at its December meeting. At the same time, expectations of a Federal Reserve rate cut in December could offer additional support to EUR/USD.
Market attention now turns to Tuesday’s release of the Eurozone Harmonized Index of Consumer Prices (HICP), a key data point for inflation trends. EUR/USD has remained confined to a broad 1.1400 –1.1720 range for over a month, as traders weigh a dovish Fed against a steady, more data-dependent ECB stance.
📊 This Weeks Market Moving Data
With the dust from the UK’s Autumn Budget now settled, attention shifts to key global data releases. In the US, the spotlight returns to labour market indicators, led by the highly influential nonfarm payrolls report. Meanwhile in the Eurozone, Tuesday’s release of the Harmonized Index of Consumer Prices (HICP), alongside fresh retail sales data, stands out as the most important economic updates of the week.
Tuesday December 2nd
The Core Harmonized Index of Consumer Prices (HICP) is important because it measures underlying inflation in the Eurozone, helping determine how quickly or slowly prices are rising. With question marks still remaining over the Eurozone inflation, this data will directly influence ECB interest-rate decisions, it can significantly move the Euro as markets react to shifting policy expectations.
Thursday December 26th
Eurozone Retail Sales Data Release
The Eurozone Retail Sales data is a great economic indicator of consumer spending across the bloc, as it measures the volume of sales of goods by retailers directly to end customers. A strong reading is generally seen as bullish for the Euro, while a weak weeding is seen as bearish.
Friday 5th Of December
US Nonfarm Payrolls Release
The US Nonfarm Payrolls report is one of the most influential indicators of American economic health, showing whether job creation is accelerating or cooling. Because it heavily shapes Federal Reserve interest-rate expectations, the release can trigger significant moves in the US dollar as markets react to the labour market’s strength or weakness.
