USD: Hasty repricing keeps dollar on its toes
The US dollar index rose yesterday as data releases began trickling in following the end of the shutdown, though not dramatically. Among the shutdown‑delayed releases, construction spending (m/m%) from the US Census Bureau overshot expectations at 0.2% vs. -0.1% for August, driven mainly by private residential spending (0.8%) after July’s upwardly revised print of 0.2%. Since May, there has been a streak of better‑than‑forecast prints, partly supported by significant investment in data center construction amid the AI boom. Meanwhile, the New York Fed’s general business conditions index (manufacturing) improved substantially – the strongest reading in about a year.
While neither release was major, we still saw further hawkish repricing, with markets assigning as little as a 40% chance of a cut this December at some point before retreating to a 50‑50 probability split during Asian trading hours today. In response, the dollar has pared back some gains this morning. This dynamic underscores the dollar’s heightened sensitivity to the Fed’s rate path as we move into 2026, as well as investors’ thirst for any government data that can help recalibrate easing expectations, with uncertainty still elevated. The outcome, however, can be hasty pricing that later unwinds as the not‑so‑impactful data is more fully digested.
The dollar continues to hover around its 21‑day moving average, in desperate need of fresh data to break higher into a more bullish trend, pending the unfolding macro backdrop. Today, attention turns to the ADP weekly jobs report and August factory orders, while the industrial production release remains delayed.
EUR: Euro treads water
The euro treaded water around the 1.16 level against the dollar yesterday, with further important upside unlikely unless softer US macro data comes through. Meanwhile, the European Commission released its autumn outlook, projecting the euro area economy will maintain moderate expansion after weathering Trump’s tariff turmoil better than expected. The Commission upgraded its 2025 forecast relative to May (1.3% vs. 0.9%), while 2026 saw a minor downgrade (1.2% vs. 1.4%).
While little reaction was expected from the euro, the data nonetheless reinforces the familiar “we’re in a good place” mantra. Here, the contrast between a steadier ECB and an uncertain Fed makes the dollar the dominant driver.
Meanwhile, EUR/GBP, after hitting fresh year‑to‑date highs at 0.8865 on Friday, fell 0.2%, bouncing off support at 0.88 yesterday. We view this as profit‑taking, giving sellers an opportunity to step in at better levels, with further sterling downside likely. Sterling also found a mild lift from hawkish‑leaning remarks by BoE policymaker Catherine Mann, who warned that the UK is operating in “a more shock‑ridden environment,” with recent shocks continuing to give “an upward bias to inflation.”
GBP: Facing a tough backdrop
Sterling continues to face a difficult backdrop, shaped by soft UK data, dovish repricing of Bank of England expectations, and persistent political noise. The near‑term bias remains tilted toward weakness, with GBP/EUR offering the cleaner expression of downside risk, despite recently hitting over 2-year lows. For GBP/USD, a decisive break below $1.30 would likely require renewed dollar strength.
Technically, cable has struggled to reclaim its 21‑day moving average since closing beneath it in mid‑September, keeping the downtrend intact. Still, if US data surprises on the soft side and triggers a dovish shift in US rate expectations, scope exists for a retest of $1.33.
Nevertheless, the pound’s trajectory is closely tied to the Autumn Budget on 26 November. While the threshold for credibility should be relatively low given stronger underlying fiscal dynamics compared with other G10 peers, doubts linger. Months of speculation around the fiscal gap, the measures to address it, and the durability of government stability leave investors cautious. A credible Budget could help reduce sterling’s fiscal premium, but political risks are unlikely to fade quickly.
Options markets reflect this unease. GBP/USD’s volatility skew has widened to its largest since March, with downside protection becoming progressively more expensive at longer tenors. The Budget itself has injected a pronounced dislocation at the front end, underscoring the scale of event risk facing sterling.
Japanese yen is worst performer across G10
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.
