GBP: UK data and the BoE set the floor for sterling
Sterling enters the week with fragile domestic momentum after October monthly GDP contracted, pushing GBP/EUR away from the €1.1460 area and leaving the cross near the upper end of the €1.13 handle. The UK focus is tightly clustered: labour market data on Tuesday, inflation on Wednesday, then the Bank of England decision on Thursday.
The policy outcome looks broadly anticipated, so the emphasis is on guidance and the extent of any dovish lean. If labour market slack builds as expected and inflation surprises lower, markets could lean more decisively into additional cuts, a clear negative for GBP, particularly versus the euro. Key downside levels in GBP/EUR sit at €1.1350 then €1.13. By contrast, firmer inflation and resilient activity would temper easing expectations and offer scope for a rebound back above €1.14.
In GBP/USD, US payrolls may dominate direction more than the BoE. Upside levels to watch are around $1.3525, with downside risk towards the $1.3225 area if UK data disappoints and the BoE reinforces an easing bias.
USD: US data and Fed speakers drive near-term pricing
The week is dominated by top-tier US releases and high-profile Fed commentary. Tuesday brings November nonfarm payrolls, with consensus looking for a soft +50k and unemployment edging up to 4.5%. A weaker print would likely pull forward expectations for the next Fed cut. Our view is that March remains live, even if markets assign only a modest probability at present.
Thursday’s November CPI is the other key waypoint, with headline inflation expected to tick up to 3.1% year on year. In parallel, markets will watch Fed rhetoric for confirmation that there is still scope for further easing. New York Fed President John Williams speaks today, while Chris Waller’s economic outlook speech on Wednesday is likely to be the week’s most market-moving Fed intervention.
EUR: ECB messaging, politics and Europe’s data pulse
Beyond the US, central bank risk sits firmly in Europe. Thursday’s European Central Bank meeting is the main external event risk for short-dollar positioning, with the euro’s performance likely to hinge on how President Lagarde frames the outlook and the rate path. Any reinforcement of the market’s recent hawkish repricing could support EUR via wider rate differentials, but a pushback on 2026 tightening expectations would cap the upside.
EUR/USD finished last week higher, finding resistance near $1.1758. Near-term fair value looks less stretched than it did a few weeks ago, but still points towards the low $1.18s if the macro and policy mix cooperates. For a sustained move into the $1.18 handle and a test of the year-to-date high near $1.1920, the market likely needs both a clear US labour downside surprise and an ECB tone that leans more hawkish than expected.
Europe also carries political and institutional risk. A potential French fiscal premium remains a background consideration into the main budget vote due by year-end, and Thursday’s European Council meeting will test whether leaders can progress the Ukraine financing package and the Mercosur trade deal without domestic veto points reasserting themselves.
Away from policy and politics, the eurozone calendar is busy: flash December PMIs on Tuesday, the final November CPI print on Thursday, then consumer confidence on Friday. Stronger confidence would be particularly constructive for the 2026 growth narrative given elevated household savings.
Looking ahead
The week’s sequencing matters. US payrolls sets the initial direction, CPI and Fed speakers refine the cut narrative, then the ECB and BoE meetings determine whether rate differentials broaden or compress into year-end. Base case is choppy, range-led trading early on, with the highest-volatility window clustered around Tuesday’s NFP and Thursday’s dual central bank risk.
