05/12/2025
(Delayed) PCE Day
Written By Dominic Woodhouse
GBP
Sterling moved up overnight but opened softer this morning as domestic data highlight a two‑speed UK economy, house prices are grinding higher while corporates accelerate job cuts. The Halifax index shows prices up 1.9% YoY in October with the average home at a record £299,862. At the same time, a BoE‑linked survey reports employment falling at the fastest pace since 2021 and construction in a steep downturn, reinforcing downside risks to growth and consistent wage pressure. Politically, the FCA has ruled out a market‑abuse probe into Chancellor Rachel Reeves over pre‑Budget briefings, removing a potential overhang but not the broader uncertainty. Near term, softer domestic momentum and global risk appetite argue for GBP underperformance but so far, sterling has remained somewhat resilient heading into the December rate decision.
EUR
The euro starts the session supported by a better tone in core data and falling USD hedging costs for eurozone investors. German factory orders finally broke a four‑month losing streak, rising 1.1% m/m in September on strength in electrical equipment, transport and autos. Eurostat’s latest estimate has Q3 euro‑area GDP up 0.2% q/q and 1.4% y/y, with today’s final release expected to confirm that modest expansion while markets watch the breakdown in consumption and wages. The eurozone calendar focuses on French and Spanish industrial production and the final GDP print, alongside speeches from ECB’s Lane and Villeroy, where any emphasis on wage disinflation would be seen as mildly EUR‑supportive. With US hedging costs falling and the dollar softer, dips in EUR/USD toward recent support are likely to attract buy‑side interest.
USD
The dollar is consolidating near recent lows, with the DXY around 98.8 and down roughly 1.4% over the past month and about 6.5% over 12 months, as markets lean into a dovish Fed narrative and year‑end seasonal dollar weakness. Expectations of a cut at next week’s meeting keep the dollar offered, with focus today on delayed September core PCE, personal income/spending and the University of Michigan sentiment survey, none of which are expected to be major standalone movers. Looking ahead, the key risk is a shift lower in interest rates if inflation expectations start to firm under a more dovish Fed chair, which would reinforce a structural bear trend in the dollar going into 2026.
