Economic Update

01 December 2025

UK Budget fallout continues; PMIs, consumer credit and shop prices in focus this week

The aftermath of last week’s Budget is still unfolding. Several claims made by the government are now under scrutiny, with weekend reports questioning whether the Chancellor and Treasury presented an accurate picture of public finances. Communications between the Office for Budget Responsibility and the Treasury Select Committee suggest that the additional tax rises stemmed from policy choices rather than the productivity downgrade widely anticipated before the statement.

Concerns also centre on the timing of tax increases, many of which coincide with the next election cycle, and the absence of meaningful spending reform to improve efficiency. While markets reacted calmly, that may reflect relief that the Budget was not worse rather than confidence in its growth credentials. Measures to boost productivity were notably absent—an omission that complicates efforts to reduce the debt-to-GDP ratio.

This week’s data releases are secondary in nature. Final November PMIs are expected to confirm earlier indications: a slowdown in services activity and a modest rebound in manufacturing. October lending figures will be examined for signs of changing consumer behaviour—whether credit is funding new purchases or sustaining existing spending patterns. Additional releases include the BRC shop price index and Nationwide house price index for November. Sterling may find it difficult to extend gains against the dollar and euro, though downside risks from this data appear limited.

Delays to US payrolls shift attention to secondary jobs data ahead of the FOMC

Last week’s calendar was light on data, and the Thanksgiving holiday further disrupted activity. The Fed’s Beige Book pointed to continued labour market weakness and softening consumer demand, while also highlighting persistent upside inflation risks. These factors keep the risk of economic stalling firmly on the radar, even as markets anticipate further monetary easing.

Speculation over the next Fed Chair intensified, with reports suggesting Kevin Hassett as a frontrunner to succeed Jay Powell. The decision could come within weeks, according to sources cited by Bloomberg.

With non-farm payrolls delayed, attention this week turns to secondary labour indicators. ISM surveys for manufacturing and services will provide employment components, alongside ADP employment, Challenger job cuts and initial claims data. Weakness across these measures would reinforce expectations for a 25-basis-point rate cut, which markets have largely priced in. The dollar index slipped back below 100 late last week, adding pressure to the USD outlook.

Euro Area indicators reinforce a wait-and-see approach

The Euro Area continues to struggle for momentum. Confidence indicators last week signalled ongoing weakness into year-end. Provisional November inflation data showed headline declines in France and Italy, but an unexpected surge in Germany’s annual HICP rate despite a sharp monthly fall. This anomaly may leave the aggregate CPI marginally above consensus when released this week.

The probability of further monetary easing remains around 30%, with little expectation of rate cuts before mid-2026. The euro held firm against the dollar last week but lost ground to sterling after the UK Budget avoided market shocks.

Upcoming releases include Euro Area CPI, French industrial production and German factory orders for October. While unlikely to alter the policy outlook, persistent industrial weakness could weigh on the euro and revive speculation of additional easing. For now, momentum remains insufficient despite prior monetary loosening and planned fiscal support into 2026.

USDCAD dips below C$1.40 as Canada’s Q3 GDP outperforms; employment data next in focus

Canada’s Q3 GDP surprised to the upside, growing at an annualised 2.6% quarter-on-quarter, driven by upward revisions to July and August figures. Strong trade performance, increased government capital spending and robust housing investment contributed to the improvement. However, October’s flash estimate showed a 0.3% monthly decline, tempering optimism.

The Canadian dollar gained on the back of the GDP release, pushing USDCAD below C$1.40. This week, November employment data will be closely watched, particularly net job creation and the unemployment rate. Another strong labour market reading could lend further support to the CAD, though sustained gains remain challenging.

Mexican Central Bank increasingly likely to hold rates steady

Recent data from Mexico, including a sharper-than-expected drop in October unemployment, strengthens the case for Banxico to leave rates unchanged at its upcoming meeting. A cut remains possible if the Federal Reserve eases policy beforehand, but the bias has shifted towards stability. USDMXN trades near the lower end of its annual range and may continue to test lower if rate differentials move in favour of the peso, with 18.18 as an initial target.

Author 

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.