Awaiting the Final Major Macroeconomic Events of the Year

Impact on GBP: Strong wage data likely to keep GBP/EUR under pressure

This morning's UK labour market data came in largely hawkish for Bank of England expectations, boosting the Sterling. Headline 3M/3M employment slowed only slightly to 173k in October, well above the 5k forecast, though this measure is often unreliable and may be overlooked. Similarly, the unemployment rate held steady at 4.3%.

The key takeaway for the Bank of England is the unexpected acceleration in wages. Both headline weekly earnings and the ex-bonus measure rose again above 5.0%. Notably, this wage growth is concentrated in the private sector—where pay surged at an annualised 12% month-on-month—reflecting broader economic trends.

While there are signs of a cooling labour market, such as vacancies remaining below pre-Covid levels, today’s data provides fresh ammunition for hawkish voices on the MPC.

No Major Data.

Impact on EUR: Fiscal support is unlikely to provide immediate relief for the Euro

The Eurozone PMI returned to expansion territory in December, rising to 51.4, largely driven by strength in the services sector. However, the manufacturing outlook remains weak, and Germany’s subdued composite PMI of 47.8 continues to limit any positive momentum for the Euro.

This could increase the likelihood of German parties making stronger fiscal stimulus pledges, particularly after yesterday’s no-confidence vote set the stage for snap elections in two months. That said, markets may take time to price in a more supportive fiscal narrative for the Euro, as concerns over Germany’s strict fiscal rules persist and expectations of significant European Central Bank easing remain a dominant theme for currency markets.

No Major Data.

Impact on USD: Still defying the seasonal trend

Yesterday’s composite PMI came in stronger than anticipated across major developed markets, though signs of softening in manufacturing were evident on both sides of the Atlantic. Currency markets appear hesitant to draw firm conclusions for monetary policy, with Dollar pairs settling into their current ranges ahead of next week’s key macroeconomic events before the year-end break.

In the US, November retail sales data will be released today, with expectations pointing to a solid reading. However, this is unlikely to influence tomorrow’s FOMC decision significantly, as data remains somewhat distorted by extreme weather events. Markets remain firmly priced for a 25bp rate cut.

For now, a wait-and-see sentiment may prevail, supporting further consolidation of the Dollar’s recent gains. Unless the Federal Reserve delivers a notably more dovish signal than markets anticipate the 2-year USD OIS rate hovering around 4.0% will likely act as a counter-seasonal force, preventing a meaningful Dollar correction in what is typically a soft December.

Major Data: Core Retail Sales m/m & Retail Sales m/m: 1.30pm

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