The US dollar opens the week on the softish side ahead of a very busy schedule of data and central bank meetings in the G10 space. The data highlight will be tomorrow’s release of November US , but we’ll also see some key Fed speakers. The theme of which central bankers will be prepared to accept market pricing of 2026 remains in focus, too
USD: Fed’s Williams Speech Could Be Important
The dollar opens one of the last big trading weeks of the year on the softish side. Last week’s pressure emerged from a Federal Reserve that remained open to further cuts, but also a broader view emerging that if the global economy remains so resilient, shouldn’t some rate hikes start to be priced elsewhere in the world?
The latter was a key factor supporting the euro and the Australian dollar last week. Buying currencies on that thesis comes with a health warning, however. Overnight, the New Zealand dollar lost 0.7% as new Reserve Bank of New Zealand Governor, Anna Breman, pushed back on RBNZ hikes priced for next year.
In terms of the domestic US story this week, the focus will be on big data releases and key Fed speeches. The highlight is tomorrow’s release of the November (NFP) data. A soft number of +50k is expected, plus the unemployment rate edging up to 4.5%.
Any softer-than-expected data here could bring forward pricing of the next Fed rate cut. We think the Fed can cut again in March, which is priced with just a 33% probability currently. Another key data point this week will be Thursday’s release of November , where the year-on-year rate is expected to nudge up to 3.1%.
We are also interested in key Fed speeches and particularly whether key figures see room for more cuts. We will hear from New York Fed President John Williams at 4:30pm CET today. He was influential in dovishly shifting market expectations ahead of last week’s Fed rate cut. And on Wednesday, we will hear a speech on the economic outlook from Chris Waller – he’s been a very influential Fed voice over recent years.
That is largely the US side for FX markets, but we also see key central bank policy meetings in the eurozone, Japan, UK, Norway and Sweden. The biggest threat to short dollar positions from overseas probably comes from Thursday’s European Central Bank rate meeting, should eurozone growth forecasts not be revised high enough or President Christine Lagarde push back against thoughts of ECB rate hikes in 2026.
For today, DXY can probably consolidate in a 98.00-98.50 range.
EUR: A Big Week for Europe
is holding onto last week’s gains. The above US events will be an important driver, as will Thursday this week. Not only do we have an ECB meeting, but we also have a European Council meeting. Here, EU leaders will be trying to sign off on a reparations loan for Ukraine and also a Mercosur trade deal. The meeting is going to prove a key litmus test of whether Europe can get stuff done or be subject to local interests, such as Belgium on the Ukraine loan or French farmers on Mercosur. Let’s see.
Away from politics, we also have a lively data calendar. Tomorrow marks the release of the flash PMIs for December, which will reveal whether recent optimism holds into the final month of the year. And after November’s final release on Thursday, the week concludes with a look at eurozone consumer confidence on Friday. Better confidence will have to be a key driver of eurozone growth in 2026, given the high savings ratios of the region’s consumers.
1.1750/60 is now important intra-week resistance for EUR/USD, and the NFP data and the ECB meeting will likely be the two largest determinants of whether EUR/USD ends the week on our preferred target of 1.1800.
GBP: Short Positioning Is Huge
Friday’s soft UK October data weighed on the pound. Looking ahead, it is a big week for UK data, central bank policy and sterling. Ahead of Thursday’s expected Bank of England rate cut, we will see jobs data (including slowing private sector wage growth) and the November release. On the latter, headline inflation should nudge lower, but and services CPI should remain firm-ish at 3.4% and 4.5% year-on-year, respectively.
A BoE rate cut this Thursday is only priced at an 85% probability. Doves like ourselves at ING expect Governor Andrew Bailey to cross the Rubicon and help deliver a 5-4 vote to cut rates to 3.75%. We then look for a further 50bp of easing in 2026 – a key reason why we see heading up to 0.90 next year.
One major threat to sterling bears, however, is positioning. Asset managers are currently running some of their shortest sterling positions in over a decade. Any positive surprises could be met with a very sharp sterling short squeeze. Expect to hear of some asset managers buying cheap upside protection in sterling, such as deeply out-of-the-money euro put sterling call options.
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