Economic Update

17 November 2025

UK Budget leaks and key UK data releases

Over the weekend, speculation emerged regarding potential property tax increases, including a surcharge on higher-value homes within the Council Tax system. London’s Mayor, Sadiq Khan, voiced concerns that such measures could disproportionately impact London and the South-East. Reports also suggested extending National Insurance to rental income—a move criticised for its potential to reduce rental property supply or increase rents.

No clear indication of spending cuts has surfaced, but based on prior government announcements, reductions will likely be necessary to create fiscal headroom for the Chancellor.

This week brings consumer price inflation data on Wednesday, followed by public finance and retail sales figures on Friday. Consensus points to softer inflation, improved public sector borrowing, and a slight decline in October retail sales volumes. While I agree with the CPI outlook, I see risks to the public finance and retail sales consensus. Borrowing could exceed last year’s level, given higher debt interest, welfare, and NHS costs. Retail sales may surprise to the upside, continuing the recovery trend since May’s slump. Stronger retail figures could provide sterling with a catalyst for further gains.

US outlook: sanctions, tariffs and jobs data

Before departing Mar-a-Lago on Sunday, President Trump indicated support for sanctions on Russia’s trading partners, aiming to restrict funding for its war effort. A Senate bill under consideration would allow tariffs of up to 500% on imports from countries purchasing Russian energy products—an escalation that could weigh on global growth.

The Supreme Court continues to review the legality of blanket country-level tariffs, while product-specific tariffs remain unaffected.

This week’s US calendar includes multiple Federal Reserve speakers, but Thursday’s September employment report will command attention. After a pause in releases, the data could drive significant dollar moves. A weak non-farm payrolls print would increase downside risk for the USD.

Eurozone: growth forecasts and rate cut risks

The European Commission’s Autumn forecast is pivotal for the euro this week. A modest upgrade to growth is likely, excluding Germany, alongside additional downside inflation risks. Markets currently assign less than a 25% probability to an ECB rate cut within six months—a view I consider too low.

Delays to inflationary EU policies, such as the emissions trading scheme now scheduled for 2027, add to medium-term disinflationary pressures. Fiscal constraints and external risks (tariffs, shipping disruptions) could further dampen growth. While EURUSD below $1.14 by year-end remains unlikely, downside risks to inflation suggest the euro faces more vulnerability than markets currently price.

Mexico: protests and GDP contraction

Recent protests in Mexico City, sparked by political violence and cartel-related concerns, have had little market impact. The peso remains resilient against the dollar.

Revised Q3 GDP figures are expected to confirm a 0.3% quarterly contraction, reversing half of Q2’s 0.6% gain. Risks lean towards a slightly deeper decline, given weaker investment and industrial output. The peso may soften marginally this week.

Canada: political uncertainty and inflation data

The Canadian dollar briefly strengthened last week, pushing USDCAD below C$1.40, but gains proved short-lived. Risks persist that the Bank of Canada may need to ease policy further—a scenario not fully priced by markets.

Attention now turns to a parliamentary vote on increased military and infrastructure spending funded by borrowing. With no Liberal majority, the government must secure support from smaller parties. Failure could trigger elections or prolong uncertainty.

October CPI data, due today at 13:30 GMT, will also be critical. A sharper-than-expected decline in headline and core inflation would heighten rate-cut speculation. Overall, USDCAD risks remain skewed to the upside this week.

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.