USD: Caution builds as markets await a clear catalyst
After peaking at 100.3 a couple of weeks ago, its highest level since late May, the US Dollar Index (DXY) has eased about 1%, marking its first back‑to‑back weekly decline since last August but still sitting on the upper edge of a six‑month consolidation range. In markets, the brief lift in sentiment when the US government reopened proved fragile: last week began with a risk‑on bid and ended with rising yields and unusually narrow equity breadth, a clear sign investors are rethinking the near‑term outlook.
That reassessment is playing out across currencies and policy expectations. A US–Swiss trade deal that cuts tariffs on key Swiss exports from 39% to 15% removes a notable drag on Switzerland’s economy, yet by easing that pressure it may increase the spotlight on the Swiss National Bank as the franc, up more than 14% versus the dollar this year and the second‑best G‑10 performer, continues its broad, persistent appreciation.
At the same time, an incomplete wave of data releases is arriving as agencies reschedule releases delayed by the six‑week shutdown, and that catch‑up will shape the Fed’s runway. Some crucial pieces remain incomplete, the Bureau of Labor Statistics has warned it may take time to finalize revised dates, and the October jobs release will lack an unemployment‑rate reading, so policymakers will have to judge an imperfect set of signals. Fed officials have already been cautious about promising cuts, stressing that easing depends on incoming data, and markets now place only about a 50% chance on a December move; if doubts persist around Fed’s next step, the dollar’s path of least resistance is upward.
Earnings and market positioning reinforce the same theme. The AI complex swung sharply in both directions as investors treated Nvidia’s upcoming results as a potential make‑or‑break moment for the broader narrative, and many have rotated into defensives and staples in anticipation of slower growth and a higher‑for‑longer rate backdrop. Bond yields rose not because the economy reaccelerated but because traders are increasingly abandoning hopes for near‑term policy relief.
Looking ahead, this week should begin to normalize information flow as delayed data are released and the Fed publishes minutes from its October meeting. Beyond the US, inflation prints from Japan, the UK, and Canada will dominate the calendar, and Nvidia’s earnings remain the marquee corporate event that could still move markets, though investors are wary, as two of the last three reports have resulted in immediate stock pain. Together, these data and events will determine whether recent market caution proves temporary or the start of a more pronounced shift in tone.
GBP: Credibility vs hikes
Sterling closed last week on a weaker footing, with a mix of political and macro factors weighing on the pound. Allegations of a potential leadership challenge for Starmer, soft labour market and GDP data, and U‑turns on tax hike plans (notably income tax) all contributed to the pressure. GBP/USD slipped 0.1% by week’s end but held above support at 1.3130/20, while GBP/EUR – the clearest expression of sterling’s risk premium ahead of the budget – was able to breach, albeit briefly, the psychologically important 1.13 level; it bounced off 1.1280 before re-entering 1.13 shortly after. The pair fell 0.5% on the week’s close.
Behind the income tax U-turn, there was an improved OBR forecast, pointing to a smaller fiscal hole than previously feared, now estimated at £15–20bn versus £35bn only weeks ago. This more workable number is certainly good news for Reeves, but sterling’s bearish reaction suggests that investors still hinge on more traditional, easier‑to‑quantify tax hikes to guarantee a clear path for closing the fiscal gap. If smaller, fragmented taxes are raised instead, Reeves may fail to convey clarity and confidence, with the plurality of fixes risking further investor unease.
For this week, the key event is UK inflation data on Wednesday. With around 25% of BoE cuts for December still unpriced despite last week’s soft data, investors appear to be waiting for confirmation of easing price pressures before fully embedding dovish pricing. Should that be the case, expect a test – and likely a breach – of the support levels mentioned above.
EUR: Pining for softer US data
EUR/USD has nearly closed its undervaluation gap on our fair value model, reducing confidence in near‑term upside unless incoming US data disappoints. The pair failed to sustain a break above key resistance late last week, leaving correction risks in play and a move back below $1.16 a clear possibility.
Technically, euro buyers managed to push through the 21‑day moving average into the weekend, breaking a cap that had held since early October. However, the 50‑ and 100‑day moving averages clustered around $1.1660 remain formidable hurdles. With the US shutdown resolved, market focus has shifted back to macro releases. Softer US prints remain the euro’s strongest catalyst, and confirmation of weaker data could quickly accelerate momentum, transforming tentative positioning into conviction.
Longer‑term risks are less promising though. Germany’s Council of Economic Experts warned last week that the anticipated fiscal boost to the economy will underdeliver. Their annual report highlights ongoing stagnation after two years of recession, with planned spending expected to provide only a modest lift to GDP. Much of the allocation is directed toward day‑to‑day operations rather than investment in infrastructure, undermining growth prospects and posing a structural headwind for the euro into 2026.
In the immediate term, flash PMIs across Europe will offer a snapshot of regional sentiment. Yet with US hard data returning and eurozone PMIs having recently misaligned with the broader macro backdrop, investors are likely to treat these releases with caution.
EUR/GBP best captures sterling’s risk premium
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: November 17-21
All times are in GMT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
