Market Commentary – November 2025

Government Shutdown Resolves, but Uncertainty Mounts for FOMC

The US dollar was slightly weaker against the broader G10 as the government shutdown limited the availability of US economic data during the month. In the absence of BLS data, investor attention turned to private labour market reports, chiefly Challenger job cuts and ADP’s new weekly employment report. These measures painted the picture of a deteriorating US labour market, but hawkish communique from Fed officials helped to counteract any impact on the dollar. The reopening of the federal government mid-month allowed the BLS to release its first batch of delayed data, including a September employment report which showed steady hiring during the month and jobless claims data which demonstrated stable turnover. The dollar saw strength mid-month, but dovish comments from New York Fed governor Williams fuelled December rate cut expectations and helped extinguish any burgeoning USD rally. That said, a December rate cut is not a complete certainty, and policymakers may be inclined to stay on hold until data catches up and the US Supreme Court rules on the legality of Trump’s tariffs in December or January.

UK Budget Takes Center Stage as BoE Waits in the Wings

GBP was the best monthly performer vs. USD as policy developments shifted the winds in Sterling’s favour. The BoE stayed on hold to start November, but a narrow 5-4 decision highlighted divisions within the MPC. Inflation remains nearly double the Bank’s target, and policymakers likely wished to show caution ahead of the Autumn Budget which was revealed later in the month. The intensely scrutinized UK budget ultimately did enough to calm gilt markets as Chancellor Rachel Reeves announced a series of tax adjustments to plug the highly publicized fiscal gap. The budget appears to be fiscally disciplined (at least enough to avoid a gilt market crisis, similar to the aftermath of Liz Truss’s unfunded tax cuts of 2022) but growth constrained. The OBR forecast growth of 1.5% for 2025 – higher than its previous estimate of 1%, however following this year, the average growth rate up to 2029 has been downgraded, as UK productivity continues to lag. Sterling picked up strength as gilt yields eased following the announcement.

Yen Falls Back, Euro Springs Forward

The yen took a tumble in November, and the slide started early with the BoJ’s decision to stay on hold at its end of October meeting. The BoJ’s decision was the first under the new Takaichi government and came despite inflation running well above target and increasing pressure to hike from multiple policymakers. As the yen tested annual lows, the Ministry of Finance issued multiple verbal warnings, but market participants largely shrugged off the MoF’s comments. Dovish communique from the BoJ and the perception of the Takaichi government influencing monetary policy presents a higher hurdle for effective MoF intervention, and the guardians of the currency may have to wait for USDJPY to test higher levels before deploying their substantial FX reserves.

The Euro held its ground in November, emerging as a top performer vs. USD over the month. The ECB kept rates steady at its late October meeting, with Lagarde declaring rates are “in a good place”. Analysts widely interpreted policymakers’ comments as signalling an end to the current easing cycle, providing a floor for EUR vs. peer FX that remain in their respective easing cycles. The euro further benefitted from safe-haven flows during the month. A mid-month risk-off event in equities, driven by a wobble in AI sentiment, notably favoured EUR. A large part of the USD’s appeal has been the performance of the magnificent seven technology stocks, of which Nvidia is the leader. This has resulted in US resilience despite tariff headwinds and slowing job growth presenting fundamental weaknesses to the dollar. Comparatively, the Eurozone remains on the upswing, supported by a fiscal stimulus path that is in the early stages of unfolding.

N.B.: This summary includes market events and currency movements up to end-of-November.

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