USD: Dollar faces growing headwinds
After a two-month stretch of USD strength – largely fuelled by hawkish Fed repricing in the data vacuum – the rally is showing signs of fatigue. The dollar index has bumped into resistance at its 200-day moving average and has fallen for four days straight. Short-term support is seen near the 21-day moving average around 99.2. Price action suggests consolidation rather than reversal, but direction hinges on incoming data.
The potential end of the US government shutdown is the key macro story this week. If operations resume, markets may finally get access to long-delayed official data – most notably the October CPI release on Thursday. These data points are much needed to recalibrate the macro narrative, which has been running on partial signals and speculative repricing.
In the absence of official releases, markets have leaned heavily on alternative indicators. The ADP weekly jobs figure yesterday showed an average decline of 11,250 private sector jobs through October 25, contributing to a softer tone in the dollar. We saw that small business confidence weakened in October too, with declining profits and sales pointing to cooling demand.
USD/CHF saw one of the biggest moves in G10 FX, driven more so by trade headlines. Switzerland is reportedly close to securing a 15% tariff on its exports to the US – a sharp reversal from the 39% levy announced in August. The franc, up 13% against the dollar this year, has pulled back from its September highs, with USD/CHF now trading around 0.8020. A finalized deal could pressure the pair toward 0.7830.
Looking ahead, the dollar faces growing headwinds from a widening divergence in policy expectations between the Fed and other central banks. Markets are increasingly pricing in multiple Fed cuts next year amid signs of labour market softening and easing inflation pressures. In contrast, the ECB, for example, appears closer to the end of its easing cycle, with eurozone policymakers pushing back against aggressive rate-cut bets.
EUR: Euro bulls seize on ADP softness
Euro bulls stepped in more confidently yesterday as weekly ADP data revealed net job losses in the private sector toward late October. EUR/USD hit 1.16 before paring back some gains. The meaningful reaction may also have been amplified by lower liquidity due to Veteran’s Day in the US, which tends to exaggerate moves.
With the shutdown nearing its end – likely any day now – investors are eager for the return of official government data to confirm whether glimpses of softness in the US labour market, captured by private alternative sources over the past few weeks, are to be validated against the gold standard. Only then does a sustained breach of the 1.16 level become a possibility.
Meanwhile, EUR/GBP continues trading at highs unseen since early 2023, following weaker-than-expected UK labour market data yesterday morning. Bulls may be growing impatient about pushing north of key resistance at 0.88, with multiple failed attempts since late October. And with almost one full BoE cut priced in for December, Thursday’s UK GDP release – unless a meaningful miss – may not justify this arduous breach. In that case, EUR/GBP could retreat, likely finding support at 0.8750, coinciding with the 21‑day moving average, rather than relying on the pair’s stronger and safer hold at the 50‑day average, which has been intact since the start of the summer. This dynamic would suggest bulls remain firmly in control, eager to re-engage in buying activity at better levels. Further GBP downside remains a likely outcome from the UK budget on 26 November – a heavier policy weapon that could ultimately trigger the resistance break.
GBP: Rate cut bets rise, hurdles remain
Sterling came under pressure after Tuesday’s disappointing UK labour-market data, with traders swiftly pricing in a higher chance of a December rate cut from the Bank of England (BoE). Overnight indexed swaps now imply over an 80% probability of easing, following a rise in the jobless rate to levels last seen post-pandemic.
But the reaction may be overdone. Labour data has been plagued by low response rates, raising concerns about reliability. BoE policymaker Megan Greene acknowledged “complications with the series,” though she suggested the worst may be behind us. Greene also warned monetary policy may not be meaningfully restrictive. sterling partially erased earlier losses as a result. Markets will look to the BoE’s Chief Economist Huw Pill’s comments later today for further guidance on how the UK central bank is interpreting the data.
Still, soft labour figures alone won’t seal the deal for a December cut. Sterling’s path will also be shaped by upcoming inflation prints and the fiscal stance outlined in Chancellor Rachel Reeves’ autumn budget. Inflation remains the key sticking point for hawks on the Monetary Policy Committee, including Governor Andrew Bailey, who recently warned that one benign CPI reading isn’t enough to justify easing.
With two inflation reports and a major fiscal event still to come before the BoE’s December 18 meeting, GBP is likely to remain sensitive to incoming data and policy signals. Meeting-dated swap pricing may stay volatile, and gilts could face renewed pressure if inflation proves sticky or fiscal risks resurface.
For now, the pound is caught between softer domestic data and lingering inflation concerns. While rate cut expectations have risen, the bar for actual easing potentially remains high. GBP may find support if the BoE pushes back against aggressive market pricing, especially if upcoming data stabilizes. But with so many moving parts, sterling’s short-term direction remains fluid.
Japanese yen under pressure
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: November 10-14
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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.
