Weekly labour-market figures released on November 5 were mixed. Initial jobless claims came in at 189,000, below the forecast of 197,000 and the previous reading of 195,000. The four-week moving average declined from 197,000 to 194,750, while continuing claims increased from 1.695 million to 1.718 million, exceeding expectations of 1.710 million. The October employment report is due at 15:30 (GMT+2) on November 6. Unemployment is expected to remain at 4.2%, payroll growth is forecast to accelerate from 29,000 to 65,000, and average hourly earnings are projected to rise by 0.3% month on month. Such results would point to continued labour-market stability and strengthen the case for further Federal Reserve tightening. The probability of a December rate increase declined following the Democratic victory in the congressional elections and stood at 66.4% in the pre-release snapshot, according to CME FedWatch. Meanwhile, Cleveland Fed President Beth Hammack said further rate increases would be appropriate to tackle elevated inflation. She favoured smaller, more frequent adjustments, arguing that these would be less disruptive to households, businesses and financial markets. Richmond Fed President Thomas Barkin also said inflation remained too high and appeared to be holding steady rather than easing, making a gradual tightening approach appropriate.
Eurozone
The euro is strengthening against sterling, weakening against the US dollar and trading mixed against the yen.
September industrial production figures released on November 6 showed a 0.7% monthly increase in Germany, the EU's largest economy, compared with expectations of no change. August's increase was revised down from 2.0% to 1.0%, while annual growth slowed from 0.7% to 0.4%. Eurozone retail sales fell by 0.7% month on month in September after a revised 0.4% increase in August. Annual growth slowed from 1.3% to 0.4%, below the forecast of 0.6%, as activity remained under pressure from trade and energy uncertainty. Investors also assessed comments from European Central Bank President Christine Lagarde, who said on November 5 that December's interest rate decision would depend on incoming economic data and updated projections.
United Kingdom
Sterling is weakening against the euro, the yen and the US dollar.
Investors remain focused on the Bank of England's November 5 decision to raise Bank Rate from 3.75% to 4.00%, its first increase in more than three years. Eight members supported a 25-basis-point rise, while one favoured a larger, 50-basis-point increase. Speaking to reporters, Governor Andrew Bailey warned that another increase was likely if the recent period of high energy prices persisted. He added that renewed inflation pressure remained possible even if tensions in the Persian Gulf eased quickly. October housing figures published on November 6 showed that UK house prices fell by 0.6% month on month after a 0.1% decline in September. The annual decline widened from 0.1% to 1.2%, according to the Lloyds House Price Index, formerly known as the Halifax index. Analysts said buyers remained cautious amid persistent inflation pressure and the Bank of England's hawkish stance.
Japan
The yen is strengthening against sterling, weakening against the US dollar and trading mixed against the euro.
Investors are assessing September wage data. Annual growth in average nominal earnings accelerated from 3.9% to 4.6%, compared with expectations of a slowdown to 3.8%, while overtime pay growth eased from 4.9% to 3.6%. These figures support expectations of persistent inflation pressure and further monetary tightening by the Bank of Japan. Separately, a Reuters poll showed that economists expected Japan's economy to have grown at an annualised rate of 0.3% in the third quarter, considerably slower than the 1.4% expansion recorded in the second quarter.
Australia
The Australian dollar is weakening against the euro, sterling, the yen and the US dollar.
Traders remain focused on September trade figures released on November 5. Export growth slowed from approximately 3.1% in August, based on revised figures, to 2.3%. Imports fell by 3.3% after rising by 6.2%, helping widen the goods trade surplus from A$0.184 billion to A$2.826 billion. Investors are also assessing comments from Reserve Bank of Australia Deputy Governor Andrew Hauser. He said confidence in the central bank's ability to achieve its objectives in the near term had declined and warned that weaker trust could make controlling inflation more difficult.
Oil
Oil prices have turned higher after an initial decline.
The market's relative stability reflects uncertainty over developments in the Persian Gulf following the US congressional elections. Diplomatic talks are underway, but the prospects for a final agreement between Washington and Tehran remain unclear. Iran is seeking an end to the US naval blockade, sanctions relief and access to frozen assets before fully reopening the Strait of Hormuz. Washington is pressing for freedom of navigation and concessions on Iran's nuclear programme. Investors hope the incoming Democratic majorities will discourage the White House from resuming full-scale military operations, although President Donald Trump has continued to leave that option open. The influence of energy-market tensions on currencies was also discussed in our previous market review.
