Last week provided a brief, yet significant, reprieve for the embattled Pound Sterling, with GBP/USD managing to close just shy of the 1.31 handle and GBP/EUR settling marginally below 1.14. This modest rebound was largely driven by a slight improvement in global risk appetite and a trimming of bearish Sterling bets ahead of this week’s main event: the Autumn Budget.
While the market still shows palpable nervousness, this bounce has effectively paused Sterling’s recent descent, leaving the path clear for the Bank of England (BoE) to react decisively once the Chancellor’s fiscal envelope is revealed. Market pricing for the BoE’s next move is clearly fractured, with a cohort of traders aggressively betting on a December rate cut (now above 70% probability based on swaps data) while others hold out for the first meaningful policy adjustment in early 2026. Critically, the debate now centers on when, not if, the easing cycle begins, diminishing the impact of any single piece of near-term economic data.
This trading week will be truncated by the Thanksgiving holiday in the US, but the calendar remains laden with high-impact data releases, ensuring volatility will not be taking a holiday itself.
Key Drivers & FX Implications: The Week’s Crucial Events
1. The UK Autumn Budget: The Sterling Litmus Test (Wednesday)
The focal point of the week will undoubtedly be Chancellor Rachel Reeves’ Autumn Budget. The market consensus suggests she faces a fiscal hole of around £20-£30 billion which must be addressed to restore fiscal credibility and avoid a repeat of the sharp volatility seen during previous budget announcements.
- The Market Expectation & Sterling Risk: The Chancellor is widely anticipated to engage in a mix of tax-raising measures, likely involving an extension of the Income Tax threshold freeze (Fiscal Drag), potential changes to Capital Gains Tax (CGT), and a tightening of pension perks (e.g., salary sacrifice limits).
- FX Implication: The Relief Rally vs. The Confidence Crash:
- Best-Case Scenario (Sterling Relief Rally): If the Budget is deemed credible, responsible, and manages to raise the necessary revenue without triggering an immediate spike in inflation or causing undue damage to long-term growth prospects, the certainty alone could trigger a relief rally for GBP. This is because removing fiscal uncertainty can reduce the risk premium currently baked into Gilt yields and Sterling.
- Worst-Case Scenario (Sterling Dive): Any measures viewed as politically motivated, fiscally irresponsible (i.e., not raising enough revenue), or those that actively stall growth (e.g., a massive corporation tax hike) would likely be met with a decisive negative reaction from bond markets, driving Gilt yields higher and sending Sterling sharply lower across the board, notably against the EUR and USD.
2. The Reserve Bank of New Zealand (RBNZ) Decision (Wednesday)
The RBNZ is expected to deliver its latest policy rate decision.
- The Market Expectation: The market has almost entirely priced in a 25 basis point (bp) cut to the Official Cash Rate (OCR), following a sustained run of soft economic indicators, weakening inflation, and a previous, larger-than-expected cut in October.
- FX Implication: The ‘Priced-In’ Risk: Since a 25bp cut is largely anticipated, the market impact on the NZD will hinge entirely on the RBNZ’s forward guidance (the OCR Track) and its statement’s tone. If the RBNZ signals that this cut marks the end of the current easing cycle, the Kiwi dollar could see a modest relief rally as the bearish overhang is removed. Conversely, any suggestion of further reductions into 2026 would confirm a deeply dovish bias and likely push NZD/USD toward new multi-month lows. Caution is advised when trading the Kiwi throughout Wednesday.
3. US Data and Thanksgiving Liquidity (Tuesday/Thursday)
While the US calendar is shortened by Thanksgiving, Tuesday offers two relevant (albeit lagged) data points:
- US Retail Sales (Tuesday): This is a delayed September report, and while the consensus is for a cooling to $+0.4\%$ month-over-month (MoM), the lagged nature means traders will apply a “pinch of salt.” However, a significant miss (a contraction) would still reinforce the narrative of a slowing US consumer, potentially adding to the Federal Reserve (Fed) rate cut rhetoric and placing temporary pressure on the USD Index.
- US PPI (Tuesday): Also a delayed September reading, the Producer Price Index is expected to remain steady at $+2.6\%$ year-over-year (YoY). As a leading indicator of consumer inflation (CPI), a surprise jump here could rekindle latent inflation concerns, offering a fleeting boost to the USD.
Market Consideration: Thursday is Thanksgiving, meaning US markets are closed and liquidity will be dramatically reduced. This environment can often lead to exaggerated volatility from even small news events; a critical point for risk management.
4. ECB Governing Council Meeting Minutes (Thursday)
With the European Central Bank (ECB) having held rates in September, the minutes will provide crucial insight into the internal debate within the Governing Council.
- Key Focus: Traders will be scouring the text for any dovish cracks regarding the Eurozone’s growth outlook, or, conversely, any continued concern over sticky services inflation and wage growth. The minutes should confirm the unanimous decision to hold rates but will highlight the balance of risks.
- FX Implication for EUR: A surprisingly hawkish tone (emphasizing inflation over growth concerns) would provide support for the EUR, helping EUR/USD find a floor. A more dovish tone (highlighting weak growth in key member states like Germany and stressing downside inflation risks) would expose the Euro to selling pressure, particularly against the Dollar.
5. Germany Flash CPI (Friday)
The week ends with the preliminary German inflation data.
- The Expectation: Forecasts anticipate a slight rise in Flash CPI to $+2.4\%$ YoY for the month.
- FX Implication: As the largest economy in the Eurozone, a stronger-than-expected German CPI figure would immediately fuel speculation that the ECB may have to delay its own expected rate cut cycle. This would be a net positive for the EUR, supporting the currency into the weekend, especially if the ECB minutes earlier in the week were mixed.
Conclusion: Navigating Certainty in a Volatile Week
This week represents a distinct shift: from speculating on the nature of fiscal and monetary policy to reacting to its delivery.
The primary risk remains the UK Autumn Budget. The inherent uncertainty will continue to drive Sterling volatility until Wednesday’s announcement provides markets with the clear fiscal roadmap they crave. Elsewhere, the RBNZ decision will provide clarity on the NZD’s forward path, while thin liquidity during the US Thanksgiving break could exaggerate movements, underscoring the need for careful risk management.
As always, success in FX markets requires not just insight into the drivers, but a robust strategy to execute your trades.
GBP/EUR 1.1342 GBP/USD 1.3078 GBP/AED 4.8073
GBP/AUD 2.0303 GBP/CHF 1.0547 GBP/CAD 1.8464
GBP/NZD 2.3382 EUR/USD 1.1516 GBP/ZAR 22.6684