Dollar Stabilises After Data Shock, Euro Drifts, Sterling Slumps on CPI.

• USD – The dollar briefly hit a two-month low after weak employment data pushed unemployment to a four-year high

• EUR –  The euro has slipped back after failing to hold recent gains, with traders focused on U.S. rate dynamics and tomorrow’s ECB meeting, leaving EUR range-bound ahead of policy guidance.
  

• GBP – Sterling has fallen sharply after a broad downside surprise in UK inflation data cemented expectations of an imminent Bank of England rate cut, now priced with near certainty.

USD:

The U.S. dollar briefly slid to its weakest level in two months following the release of yesterday’s employment data, before stabilising and recouping some ground during overnight trading. The decline was largely attributed to federal job losses tied to earlier policy decisions. As a result, the unemployment rate climbed to 4.6%, exceeding expectations of 4.5% and marking its highest reading in four years. The combined data reinforced concerns among investors and policymakers that labour market conditions remain fragile, strengthening the case for additional monetary easing. The economic calendar is lighter today.

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EUR: 

The euro is trading with a softer tone today after failing to sustain gains above recent highs, as attention remains firmly on developments in the U.S. and the upcoming European Central Bank policy decision. While EUR/USD briefly attempted to push higher earlier in the session, momentum faded quickly as dollar demand re-emerged, highlighting the pair’s sensitivity to shifting rate expectations rather than euro-specific drivers. Looking ahead, the focus is squarely on tomorrow’s ECB meeting, where officials are expected to hold rates steady but maintain a carefully balanced tone. Any indication that policymakers are becoming more comfortable with the disinflation trend could weigh on the euro, while pushback against early rate-cut expectations may provide some near-term support. Until then, EUR is likely to remain range-bound, with price action driven more by positioning and external influences than domestic fundamentals.

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GBP: 

Sterling has come under heavy pressure this morning, falling over 0.7% after UK inflation data for November came in well below market expectations. The headline CPI reading declined sharply from 3.6% to 3.2%, significantly undershooting forecasts, with both core inflation and services inflation also easing more than anticipated, printing at 3.2% and 4.4% respectively. The breadth of the disinflation has strengthened confidence that the Bank of England is poised to deliver a rate cut at its upcoming meeting. Markets are now assigning an almost certain probability — close to 98% — to a policy easing tomorrow, with expectations building for an additional cut to follow in either March or April.

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