Last week was largely defined by the Federal Reserve’s interest rate decision. As expected, the Fed delivered a 25 basis point cut and signalled that two further reductions are likely through 2026. While this path was broadly priced in by the market, attention is already turning to the upcoming change in Fed Chair next year. That transition introduces an added layer of uncertainty, with markets questioning whether future rate cuts could become more frequent as policy leadership evolves.
Looking ahead, this week is shaping up to be one of the busiest before we move into the Christmas period, when market liquidity typically drops sharply. For anyone with larger FX requirements, this is very much the window to act. Conditions next week are likely to be thinner, with wider spreads and less reliable pricing as trading desks wind down for the holidays.
We start the week on Monday with key data out of China, including retail sales and industrial production. Both are expected to come in broadly in line with previous readings, so unless there is a significant surprise, these releases should not drive major market moves. Later in the day, Eurozone industrial production is released and is expected to show a strong rebound of 0.8 percent. If confirmed, this would provide some support for the Euro and reinforce the recent improvement in European data.
Tuesday is where volatility is likely to pick up. The UK labour market report is expected to show unemployment rising to 5.1 percent, alongside a 0.4 percent drop in average weekly earnings. This combination would be negative for Sterling and could trigger selling pressure early in the London session. Later in the day, flash PMI data is released across the Eurozone, the UK and the US, with mixed results expected. The main event, however, is the release of November’s US Non Farm Payrolls data. This will be closely watched as markets assess whether further US rate cuts are justified, making Tuesday a potentially volatile session for both GBP and USD pairs.
On Wednesday, attention turns to inflation. UK CPI is expected to ease slightly to 3.5 percent from 3.6 percent, which may put modest pressure on Sterling as it strengthens the case for further rate cuts. Eurozone CPI follows and is expected to remain steady at 2.2 percent, keeping the ECB close to its inflation target.
Thursday brings a heavy concentration of central bank decisions. The Riksbank, Norges Bank, Bank of England and European Central Bank all meet. The only policy change expected is from the Bank of England, with a 25 basis point cut to 3.75 percent widely anticipated. As this move is already priced in, Sterling’s reaction will depend on forward guidance. Any indication that further cuts are likely in 2026 could weigh on the Pound. Markets will also listen closely to the ECB’s tone. Any hint of future rate hikes would represent a significant shift in policy and could provide strong support for the Euro.
The week concludes on Friday with the Bank of Japan’s decision, where a 25 basis point rate hike is expected, taking rates to 0.75 percent. Even though this move is anticipated, it remains a meaningful policy shift and could have a notable impact on broader markets. UK retail sales are also released later in the day, with expectations at 0.4 percent. Given recent consumer data, there is a risk this figure disappoints, which could cap any late week Sterling strength.
Overall, this is a critical week for positioning ahead of year end. With high impact data, multiple central bank decisions, and liquidity set to thin rapidly after Friday, proactive FX planning is particularly important.