GBP: UK labour data in focus, BoE cut still likely
Sterling caught a bid after UK wages printed above consensus. Average earnings (including bonuses) rose 4.7% in the three months to October versus 4.4% expected, lifting GBP/EUR towards 1.1382 (from 1.1367) and GBP/USD towards 1.3378 (from 1.3355). We see limited scope for extension. The wider jobs picture continues to soften, with payrolled employment down 38k and October revised to a 22k decline, while unemployment rose to 5.1%. This keeps the base case centred on a Bank of England cut on Thursday. The wage story also looks less durable under the surface: median pay growth is reported at 2.7% y/y in November, and regular earnings growth remains skewed to the public sector (7.6%) versus the private sector (3.9%), suggesting the headline strength may not persist. With several peers nearer the end of easing, relatively faster UK yield downside into 2026 should remain a headwind for GBP against non-USD FX. Positioning bears watching: very short sterling leaves room for tactical squeezes, with the next speculative positioning snapshot (as of 2 December, post-Budget) due late Wednesday.
EUR: PMIs are the key input into Thursday’s ECB meeting
Today’s focus is on French, German and euro area PMIs, following yesterday’s more encouraging industrial production tone. Lower energy prices continue to help, improving the euro area terms of trade and offering a constructive macro tailwind for EUR. Any confirmation that the EU is delaying the combustion engine phase-out would add to the improving industrial narrative. In EUR/USD, 1.1720/25 looks like near-term support on firm US data, while a move through 1.1780 would leave 1.1800/1.1820 in play.
USD: Delayed NFP is the main US catalyst, but pricing looks sticky
The delayed non-farm payrolls report is the headline US release, covering both October and November. Consensus looks for roughly +50k jobs in November and unemployment edging up to 4.5% (no unemployment rate for October). In-line prints are unlikely to shift the Fed narrative materially, with markets already leaning towards the next 25bp cut by April and another by September. One development worth flagging is the recent drop in US money market rates following the Fed’s Treasury bill purchase announcement, which has pulled three-month USD hedging costs down towards levels last seen in September 2022. October retail sales and S&P PMIs also print today, but they look secondary volatility drivers unless the surprise is large.
Looking ahead
Thursday’s BoE decision is the near-term GBP anchor, with guidance on the 2026 easing path likely to matter as much as the cut itself. In EUR, PMIs and energy dynamics will shape expectations into the ECB. For USD, it likely takes a clear payrolls surprise to force a meaningful repricing of the near-term Fed path.
