Last week was relatively volatile across the markets, largely driven by ongoing uncertainty in Washington as the U.S. Government shutdown enters its second week. So far, there’s still no clear path toward resolution, with both political parties locked in a funding deadlock. The longer this shutdown continues, the more it risks weighing on U.S. economic activity —-particularly as key government agencies remain closed and data releases are delayed. This makes it increasingly difficult for investors and policymakers to gauge the health of the U.S. economy heading into Q4.
With that in mind, this week’s calendar is much lighter than usual, given that many U.S. economic indicators won’t be published while the shutdown persists. However, there are still a few events that could drive sentiment across the FX market.
We start on Monday with Eurozone retail sales, expected to come in slightly better at 0.1%. While this may not be a blockbuster figure, any sign of resilience in European consumer spending could offer mild support to the Euro – particularly after recent signs of softening growth.
From a geopolitical standpoint, there is also some cautious optimism emerging from the Middle East, where reports suggest that Hamas has agreed to release Israeli hostages and proceed with the proposed peace deal. Although fragile, this development is a welcome step toward de-escalation in the region and could help ease recent risk aversion, potentially supporting global equities and commodity-linked currencies.
On Wednesday, attention will turn to the Reserve Bank of New Zealand (RBNZ), where a 25bps rate cut to 2.75% is widely expected. This move would likely weaken the New Zealand Dollar, particularly as policymakers continue to prioritise supporting growth over controlling inflation. Later in the day, the Federal Reserve’s FOMC minutes will be released – a key opportunity for markets to assess how close the Fed is to a confirmed rate cut in the coming months. With recent U.S. data pointing to slowing momentum, the tone of these minutes could prove market-moving.
Finally, on Thursday, we’ll get ECB minutes from September’s meeting. No major surprises are expected here, as policymakers appear comfortable with current policy levels, but traders will still be watching for any hints on the timing of future cuts. We’ll also see the latest U.S. jobless claims, where a small rise is anticipated — though with the shutdown still ongoing, this data may be incomplete or subject to revisions.
Overall, it’s likely to be a quieter week from a data perspective, but that doesn’t mean calm markets. Between the U.S. shutdown, Middle East tensions, and rate speculation across the major central banks, volatility can still emerge quickly – particularly if political or geopolitical headlines take a turn.
GBP/EUR 1.1505 GBP/USD 1.3414 GBP/AED 4.9310
GBP/AUD 2.0328 GBP/CHF 1.0719 GBP/CAD 1.8726
GBP/NZD 2.3041 EUR/USD 1.1642 GBP/ZAR 23.2017