• The pound may face a turbulent trading week ahead.

• Market pricing now shows higher expectations for a Fed rate move.

What Moved the Markets Last Week?

UK data underwhelmed as November PMIs slipped to 50.5, missing expectations. Gilts found support while sterling eased, reflecting softer public finance figures that overshot OBR forecasts by £9.9bn and weaker-than-expected October retail sales.

In the US, expectations for a December Fed rate cut climbed to around 75% after dovish remarks from Williams and Miran, driving Treasury yields lower and pressuring the dollar. Business activity indicators reached a four-month high—helped by strength in services—amid growing confidence in further policy easing and relief around the government shutdown. Despite the softer tone late in the week, the USD still recorded its strongest weekly performance in more than a month.

The focus today is on the UK, where Chancellor Rachel Reeves prepares a pivotal budget aimed at rebuilding trust in the country’s fiscal stance after a year of market scepticism. A credible plan could help stabilise sentiment and offer some support to sterling. However, with a rise in headline income tax reportedly ruled out, the government is expected to piece together smaller revenue measures instead—a strategy that may be viewed as cautious and could leave investors unconvinced. Adding to the challenge, Sky News reports that the OBR is set to downgrade growth projections for 2026 and for every year of the current parliament, a development that may keep pressure on GBP if it raises doubts about the UK’s medium-term trajectory.

Across Europe, inflation figures from the major economies and Germany’s Ifo survey will help shape expectations for the ECB’s next steps, with comments from President Lagarde and Chief Economist Lane also in focus. The Bank of England’s Megan Greene is due to speak as well.

In the US, a series of delayed releases—including retail sales, PPI, ADP employment, jobless claims and the Conference Board survey—will dominate the data calendar, although market activity will be muted ahead of Thursday’s Thanksgiving holiday.

Elsewhere, the RBNZ is anticipated to lower rates by 25bps, marking a shift in its policy stance.

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