🇬🇧 GBP Outlook Brightens Into Year-End After Solid Gains and PMI Upgrade
Last week, sterling built strong momentum against key currency pairs. Cable rose almost 1%, opening the week above 1.32, while GBP/EUR also moved higher and started the week around 1.14. The Pound also posted its strongest one-day performance versus both the Dollar and the Euro in a month last Wednesday.
Analysts largely linked the move to rising investor confidence that the Federal Reserve will begin cutting rates next week, with expectations for further policy support through 2026. With budget-related uncertainty now largely behind us, the focus has shifted back to the data, and there was some encouraging news.
S&P Global’s monthly PMI survey signalled more resilience in the UK’s private sector than initially thought. The November Services PMI was revised up from 50.5 to 51.2, suggesting the economy softened less than feared in the run-up to the budget. This points to a strong likelihood that GBP finishes 2025 on a positive note heading into 2026.
🇺🇸 USD Slides as Fed-Cut Bets Build and Labour Signals Weaken
It was a disappointing week for USD, which traded lower across the board as investors reassessed the path for Fed policy. The Dollar fell against Sterling and broadly weakened versus its peers as investors increased bets on further Federal Reserve rate cuts. That shift followed a weaker than expected ADP print(Automatic Data Processing), private-sector payrolls fell by 32,000 in November. With several official releases still delayed and a meaningful backlog building, economists have been forced to lean more heavily on alternative indicators to gauge underlying momentum.
One of this week’s standout data points was the Challenger, Gray & Christmas report, which showed US employers announced 153,074 job cuts in October, up 175% year on year and 183% from September. These figures that added to the downbeat tone and helped keep DXY under pressure, opening the week below the 99.00 handle.
🇪🇺 Euro Supported by Stronger Data, Holds Gains Against the Dollar
The Euro ended last week higher against the Dollar, with EUR/USD starting this week above 1.16, while EUR/GBP eased to around 0.873. Support came from a run of positive Euro-area releases, German factory orders rose 1.5% in October versus 0.3% expected, with September revised up to 2.0%. French industrial production also surprised to the upside, rising 0.2% against forecasts for a 0.1% decline, while Spanish output increased 0.7%, ahead of the 0.5% consensus.
The region’s broader backdrop remained constructive too, with Eurozone GDP expanding 0.3% q/q in Q3 (vs 0.2% expected) and employment up 0.2% (vs 0.1%), leaving the Euro well placed to build on its roughly 12.5% gain against the Dollar this year.
This Weeks Key Market Moving Data
This week’s marquee release is the Federal Reserve decision, where a 25bp rate cut is widely expected and largely priced in. Markets will focus on the Fed’s updated guidance and its 2026 projections for clues on the path ahead.
In the UK, GDP is due on Friday, following the Governor’s report from Andrew Bailey on Thursday. The Eurozone also has a heavy data slate on Friday, led by Germany’s Harmonised Index of Consumer Prices (HICP).
Wednesday 10th December
Federal Reserve Interest Rate Decision
The Fed decision is pivotal for the Dollar because it anchors expectations for where US interest rates are headed, which in turn drives USD yield support. Even if a 25bp cut is priced in, the greenback will likely react to the Fed’s guidance and updated 2026 projections. More dovish signals typically weigh on the Dollar, while a more cautious tone can underpin it.
Thursday 11th December
BofE’s Governor Bailey’s Speech:
Andrew Bailey, the leader of the Bank Of England, will deliver a speech regarding monetary policy and will be offering insights into future policy direction.
Friday 12th December
GBP Gross Domestic Product (MoM) (Oct)
UK monthly GDP is significant as it shapes expectations for domestic growth and is a key indicator for how quickly the Bank of England can ease policy. A stronger than expected print typically supports sterling by reducing near-term rate-cut pricing, while a weaker reading can pressure GBP as markets lean more dovish on the BoE.
Germany Release Harmonized Index of Consumer Prices
Germany’s HICP inflation print matters for the Euro because, as the largest economy in the Eurozone, it has outsized influence on the region’s overall inflation outlook and ECB policy expectations. A higher than expected reading can support the Euro by pushing back against rate-cut pricing, while a softer print may weigh on the Euro as markets lean toward earlier easing.
