Forex: EUR/USD strengthens amid stable inflation in Germany
On Friday at 12:00 (GMT+2), the eurozone will release GDP and employment data for Q3. Economic growth is expected to remain unchanged from the previous period at 0.2% quarter-on-quarter and 1.3% year-on-year. Employment forecasts also indicate stability at 0.1% and 0.6%, respectively. The single currency received some support from ZEW’s macroeconomic sentiment data: the overall eurozone index strengthened from 22.7 to 25.0 points versus preliminary estimates of 23.5, while in Germany it declined slightly from 39.3 to 38.5 points, below expectations of 40.0. Meanwhile, U.S. investors and forex traders are focused on the potential end of the government shutdown. Earlier this week, the U.S. Senate approved a revised funding bill that provides temporary financing for the federal government until the end of January 2026. The bill now awaits another vote in the House of Representatives before being signed by President Donald Trump, which would bring an end to the record-long shutdown. Markets also paid attention to employment data released earlier, which showed a decline of 11.25 thousand after a previous increase of 14.25 thousand. Additionally, the NFIB Small Business Optimism Index in October fell from 98.8 to 98.2 points, slightly below expectations of 98.3.
GBP/USD
The British pound is losing ground against the U.S. dollar, holding near 1.3130 as the pair continues a downward correction from early-month highs. Pressure on the pound came from the latest labor market data: jobless claims rose by 29.0K in October after an increase of 0.4K in the previous month and a forecast of 20.3K. Employment fell by 22.0K in September after a rise of 91.0K previously. The unemployment rate rose from 4.8% to 5.0%, slightly above expectations of 4.9%, while average earnings excluding bonuses dropped from 4.7% to 4.6%, and including bonuses—from 5.0% to 4.8%, suggesting weakening inflationary pressure. Consequently, investors are raising expectations for a possible Bank of England rate cut before year-end. On Thursday at 09:00 (GMT+2), the UK will release its Q3 GDP report, with forecasts pointing to unchanged growth of 0.2% quarterly and 1.4% annually. Industrial production data will also be released, with monthly volumes expected to decline by 0.2% after a 0.4% gain, and annual output projected at –1.2% versus –0.7% previously. Meanwhile, the U.S. dollar remains under slight pressure amid optimism that the shutdown will end soon. The Senate has already approved the temporary funding bill through January 2026, awaiting final passage by the House of Representatives and the president’s signature.
AUD/USD
The AUD/USD pair is consolidating near 0.6530 as traders await new market catalysts. Today’s Australian mortgage data showed lending volumes rose 4.7% in Q3 after a 2.2% increase in the previous month, far exceeding forecasts of 2.5%. Investment housing loans surged 17.6% versus expectations of 4.0%. On Thursday at 02:30 (GMT+2), Australia will publish October labor market data, which could significantly influence the Reserve Bank of Australia’s (RBA) next rate decision. Employment is expected to rise by 20.0K after an increase of 14.9K previously, while unemployment may edge down from 4.5% to 4.4%, supporting the case for further monetary easing. The RBA held its rate steady at 3.60% in November, with a unanimous decision. Earlier data showed optimism: the Westpac Consumer Confidence Index rose 12.8% in November after –3.5% a month earlier, and NAB’s Business Conditions Index climbed from 8.0 to 9.0 points. The U.S. dollar remains pressured as traders anticipate the end of the shutdown, though the temporary fix only extends funding until late January. Meanwhile, ADP employment data revealed a decline of 11.25K after a gain of 14.25K previously, reflecting the impact of large-scale government-related layoffs.
USD/JPY
The U.S. dollar shows moderate growth in the USD/JPY pair, extending gains from the previous session and testing February highs near 154.65. Traders await new macroeconomic drivers, particularly from the U.S., where a large batch of economic data is expected following the end of the shutdown. Earlier this week, the Senate approved a temporary government funding bill, now awaiting a House vote. The labor market remains in focus, as upcoming data could shape the Federal Reserve’s future rate decisions. Japanese data offered little support to the yen: October machinery orders jumped 16.8% from 11.0% in September (forecast: 9.9%), while bank lending rose 4.1% from 3.8%. The Eco Watchers Current Index increased from 47.1 to 49.1, exceeding market expectations of 47.6.
XAU/USD
Gold (XAU/USD) shows slight weakness during the morning session, retreating from the October 23 highs and once again testing the 4100.00 level. Investors are locking in profits ahead of a potential U.S. government reopening. However, the situation is weighing on the dollar as markets brace for the release of numerous delayed macroeconomic reports that could influence the Fed’s rate outlook.
According to the CME FedWatch Tool:
- 63.4% of market participants expect a 25 basis-point rate cut to a range of 3.50–3.75%.
- 36.6% expect the rate to remain unchanged at 3.75–4.00%.
The current rate range is 3.75–4.00%, reflecting prevailing expectations of a dovish monetary policy by late 2025.
However, Fed Chair Jerome Powell maintains a cautious stance, noting that a December rate cut is not guaranteed. Markets await the final House vote on the Senate-approved temporary funding bill extending government operations through January 2026. Meanwhile, ADP employment data — based on a survey of roughly 400K businesses — showed a decline of 11.25K after a 14.25K increase last month, highlighting ongoing weakness in the labor market. The NFIB Small Business Optimism Index slipped from 98.8 to 98.2, slightly below the expected 98.3. On Thursday, October inflation data will be released, currently standing at 0.3% month-over-month and 3.0% year-over-year.