USD: Hovering near half-year highs
The US dollar index briefly reached a six‑month high on Friday before ending the session flat. It marked the strongest weekly performance for the world’s reserve currency since early October, with the decisive break and hold above the 200‑day moving average strengthening the case for further gains in the near term. If risk aversion continues to grip markets, that momentum is likely to be reinforced, adding further support to the dollar’s upside bias.
If there’s one thing defining markets right now, it’s uncertainty. Delayed US data is clouding the economic picture, Fed pricing is volatile and shifting by the day, and the stress in crypto markets is bleeding into equities – unleashing a wave of deleveraging. Volatility gauges in equities and bonds are marching higher, underscoring how fragile sentiment has become. Nvidia’s earnings offered a brief reprieve, but not enough to steady the broader trend. Even the US dollar is trading with an asymmetric reaction function, moving more sharply on hawkish repricing than on dovish relief.
Last week underscored just how swiftly stress can ripple through crowded positions, with momentum‑fuelled markets driven by retail flows faltering without any clear catalyst. There was no policy change, no data shock, no earnings disappointment — only a sharp burst of selling. What unsettled investors wasn’t merely the size of the swings, but the pace at which they unfolded, revealing a market highly synchronized and vulnerable when pressure mounts. However, thanks to dovish remarks from New York Fed President John Williams – the market sell-off came to a halt as the odds of December Fed rate cut jumped back towards 80%.
Interestingly, the US dollar didn’t lose much ground despite the dovish repricing. This resilience highlights an asymmetric reaction function at present: the USD strengthening more when markets price out cuts or lean hawkish but showing only muted weakness when dovish expectations rise. This is likely due to the current market climate, where safe‑haven demand and heightened global risk aversion are keeping the dollar supported.
GBP: Budget week is here!
Sterling enters the week exhausted – down 6% against the euro year to date. Last week the pair held above €1.1320, closing ~0.4% higher. Over months now the pound has been weighed down by macro data still pointing to structural softness, media leaks raising doubts about the government’s ability to deliver the fiscal discipline markets demand, and politics, with growing concerns over fractured unity in the government amplifying those issues. With the bar set high for further sterling weakness, last week’s rosier price action made sense. It’s clear the bearish cascade has hit an exhaustion point. The €1.13 level – below which the pair hasn’t traded for almost three years – stands as a critical wall.
Options markets remain firmly bearish into the Budget, but near‑term moves will hinge on perceptions of how Reeves communicates her fiscal plans. The U‑turn on key income‑tax tweaks has removed some certainty from investors’ minds about how she intends to fix the fiscal hole, raising the risk of further short-term weakness for sterling. If the plan fails to convince, €1.13 becomes the clear target.
Meanwhile, GBP/USD closed the week ~0.5% lower. Among the majors, the dollar is the one sterling still has the most “catching up” in terms of further depreciation, with the pair remaining 4.6% higher year to date. Yet a bearish setup is gradually taking shape: GBP/USD has only recently slipped below the 200‑day moving average, with the 21‑day crossing beneath the 200‑day, and the 50‑ and 100‑day averages close to following. The Budget could well reinforce this bearish momentum.
EUR: Hanging tight to $1.15
The euro ended last week nearly 1% lower against the dollar, holding tenuously above the $1.15 handle. The technical picture suggests that without fresh catalysts, short‑term bearish momentum could begin to chip away at the still‑intact longer‑term structure. For now, US policy uncertainty remains the dominant driver of EUR/USD, with the broader risk‑off environment amplifying dollar demand at the euro’s expense.
This week, we might see the euro a bit more sensitive to domestic data, though. European Commission confidence indicators will test whether recent improvements in survey measures can withstand mounting macro headwinds. Final GDP prints for France and Germany, alongside German retail sales, will provide a clearer read on growth. Germany remains on recession watch: Q2 growth was revised to ‑0.3%, and with Q3 flat, any downward revision would confirm a technical recession in the bloc’s largest economy. Inflation dynamics also warrant close attention, with CPI releases from France and Germany set to gauge whether price pressures have truly stabilised near target.
Should markets begin to price such a move, the euro would likely come under renewed pressure. That said, as we continue to highlight, the currency’s broader direction remains tethered to US dynamics, where policy uncertainty and risk‑off flows continue to set the decisive tone for EUR/USD.
Swissy comes under pressure
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: November 24-28
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.
