USD: From sideshow to spotlight: ADP moves markets
According to the November ADP report released yesterday, US companies shed the most payrolls since early 2023. Private‑sector payrolls decreased by 32,000, with wage growth also cooling.
The outcome is certainly welcome news for those doves frantically searching for hard evidence to justify what still looks like an exaggerated 90% probability of a quarter‑point cut priced in for December. Recall that pricing surged to 80% after Fed’s Williams remarked that a December cut was a possibility – words rather than evidence triggered a directionally charged but hesitant repricing.
The picture remains mixed, and ADP data does not usually move the needle much in normal times, though it did yesterday. This is why the 90% probability remains, in our view, largely unfounded with key data pieces still missing. That said, that’s all we get for now and markets can’t help but magnify its importance.
The dollar fell across the board, with the dollar index closing down ~0.4%. With almost a full cut now priced in, the move may also be attributed to a mean‑reversion mechanism, whereby the dollar index realigns with the rate differentials implied by its key constituents.
Overall, our view remains that the December policy decision could very well mirror September and October: a cut packaged up in hawkish messaging – which would likely turn out to be yet another dollar‑positive story.
EUR: EUR/USD rejuvenated as Fed dovishness builds
The euro gathered strength against the dollar as the week progressed, supported by cues that reinforced expectations of Fed easing in December. Yesterday’s ADP private-sector payrolls data continued to show signs of softness in the labour market, while Trump’s likely dovish nomination for Fed Chair added to USD‑negative sentiment.
Meanwhile, Tuesday’s higher-than-expected eurozone inflation y/y offered evidence that the euro leg remains steady. On its own, the release did not sway the euro significantly, but when set against a more dovish outlook for the dollar, the rate differential in favour of the euro came into sharper focus.
Technically, EUR/USD has pushed beyond resistance barriers we have highlighted for some time, coinciding with short‑term moving averages – notably the 21, 50, and 100‑day. The 21‑day acted as the first bearish guide at the start of October, before giving way to the 50‑ and 100‑day, which by mid‑October had capped price action and reinforced the downtrend. Fast forward to today, and we see a rejuvenated pair breaking through those ceilings, setting the stage for further upside. The bearish structure appears in fact broken, with EUR/USD now trading north of the downtrend established since mid‑September.
However, for the breakout to sustain and for EUR/USD to re‑approach year‑to‑date highs, more dovish messaging from the Fed that conveys a cohesive narrative against a still fractured data backdrop remains necessary.
For today, eurozone retail sales print is expected to be flat for October, following contractions in August and September. That said, with the ECB on a fixed policy path, US data will continue to carry greater weight in driving the pair.
GBP: Pound pops to 1-month highs
Sterling surged over 1% versus the US dollar yesterday – its biggest one day rise since April. GBP/USD bulldozed through key moving averages on a path towards $1.34 though momentum stalled just shy of the 100‑day average around $1.3370. The surge beyond its upper Bollinger Band and nearing overbought RSI levels, reflects strong bullish momentum but it also raises the risk of consolidation. Meanwhile, GBP/EUR also climbed to a one‑month high, hinting at a tentative short‑term breakout.
Helping the pound extend its post-Budget rally, a closely watched survey showed that UK business activity expanded at a stronger pace than expected, painting a rosier picture of the country’s economy. The services PMI was revised up to 51.3 from 50.5, comfortably above the 50 threshold separating expansion from contraction, while the composite PMI rose to 51.2 from 50.5 reflecting the seventh consecutive month of expansion in the UK’s private sector activity.
Positioning dynamics suggest further unwinding of GBP shorts have added fuel to the pound’s recovery, while a reduced — though not eliminated — fiscal risk premium has provided some breathing space too. Options markets reflected heightened pre‑Budget anxiety, with traders building significant downside hedges in sterling. With the Budget broadly validating expectations, some of those left‑tail risks have now been priced out, easing immediate pressure on GBP volatility.
Meanwhile, CFTC data also highlight a divergence in sterling positioning: leveraged funds, whose bullish bets halved during the summer selloff, have since steadily rebuilt longs. In contrast, asset managers — typically a proxy for longer‑term sentiment — remain net short, underscoring persistent structural caution toward GBP.
Taken together, sterling’s rebound looks more like a counter‑trend stabilisation than a fundamental shift in sentiment in our view. Near‑term resilience offers tactical opportunities, but persistent headwinds mean 2026 is likely to be a challenging year for the currency.
GBP crosses enter oversold territory, according to RSI
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: December 1-5
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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.
