• Attention turns to upcoming policy decisions from the Bank of England and the European Central Bank

• Key US employment and inflation data are likely to drive increased dollar volatility

What Moved the Markets Last Week?

Sterling came under pressure on Friday after UK economic data fell short of expectations. GDP figures showed the economy shrank by 0.1% in October, contrasting with forecasts for modest growth, which weighed on the pound for most of the session.

Markets open the week with limited momentum, as euro-area industrial production and Canadian inflation data are unlikely to drive major moves unless inflation comes in notably weaker than expected. Attention then shifts quickly to Tuesday, which shapes the broader outlook for the rest of the week. UK labour market figures will be closely watched ahead of Thursday’s Bank of England decision, with softer wage growth and employment reinforcing expectations of easing policy. European flash PMIs will also be scrutinised for early signs that manufacturing activity may be finding a floor.

In the US, the focus remains firmly on the labour market. November’s jobs report is expected to show slower hiring and a rise in unemployment, with the jobless rate likely to be the key factor influencing market sentiment. Midweek, UK inflation data could still complicate the outlook for a BoE rate cut if price pressures prove more persistent than forecast. Germany’s Ifo survey and comments from Federal Reserve officials add to the risk of midweek volatility.

Thursday is the pivotal day, dominated by central bank decisions. The BoE is widely expected to deliver a 25bp rate cut, while the ECB is likely to keep policy unchanged, with updated forecasts guiding market reaction. In the US, weekly jobless claims may carry more weight than inflation data as the Fed remains focused on labour-market trends. The week concludes with a heavy UK data slate, including public finances, retail sales and consumer confidence, while US existing home sales are expected to remain weak.

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