Brace for impact - strong Eurozone data ahead of Thursday’s interest rate decision. UK rate decision keeps GBP on high alert alongside a tsunami US data releases

The UK and the Eurozone announce interest rate decisions on Thursday and Tuesday sees a huge amount of US data. With the USD on the slide (GBP/USD at 1.3360 & EUR/USD at 1.1750), we have 2 months of employment data slung at us on Tuesday afternoon.

USD: EUR/USD traded higher throughout the week as investors turned cautious ahead of an array of delayed US macroeconomic releases on Tuesday 16th and the European Central Bank's policy decision on Thursday.

EUR/USD held onto gains after rallying nearly 2% over the last 3 weeks (sitting at 1.1750 now) as investors positioned for last week's interest rate cut by the US Federal Reserve and for President Trump's pick to replace Fed Chairman Jerome Powell, who is expected to be a dovish loyalist - i.e. will pursue Trump’s desire for lower rates.

USD/CAD has been under pressure, struggling to regain ground as the USD underperforms, with investors assessing the US interest rate outlook for 2026. As a result, the pair trades vulnerably near its almost three-month low around 1.3750.

Also, expectations that the Fed will implement more interest rate cuts in 2026 weigh on the USD against the CHF. The non-farm payrolls and heavy employment data from the two last months will without bring a volatile week.

GBP: GBP starts BoE’s monetary policy week on a cautious note against major peers, as it braces for volatility. GBP might face selling pressure after the flood of economic data release of this week, and the strong expectation that BoE will cut interest rates on Thursday.

GBPJPY is down 0.5% around 207.30 during the European trading session. The pair faces pressure as the JPY outperforms across the board, following the release of the Japan’s Tankan Q4 business sentiment data.

The BoJ is expected to raise interest rates by 25 basis points (bps) to 0.75% Governor Kazuo Ueda stated recently that central bank is getting closer to achieve its inflation target

GBP awaits labour market data this week - expected to show that the Unemployment Rate rose to 5.1%, and Average Earnings grew moderately by 4.5%. Signs of rising jobless rate and slowing wage growth boost the expectations of an interest rate cut by the BoE in its monetary policy meeting on Thursday.

EURO:  EUR/USD has retraced previous losses, reaching 1.1745 at the time of writing, with the 1.1762 multi-month high a short distance away. The pair draws support from a strong increase in the Eurozone's Industrial Production, which has improved the market mood, ahead of an array of key macroeconomic events later in the week.

Data released by Eurostat earlier on Monday revealed factory output growth accelerated to 0.8% in November, from 0.2% in October, beating expectations of a 0.1% growth. Year-on-year, industrial production increased 2%, from the 1.2% growth seen in October.

All this is good news for the EUR, but the ECB is not expected to change rates this week.

Elsewhere:

China data this morning showed a very poor retails sales number - 1.3% rise vs 2.9% expected - showing fault lines in the consumer-driven retail sector which might be indicative of the mounting pressure on Chinese households disposable income.
Also disappointing was Industrial Production data which undershot expectations. If cross-sector data continues to be weak, this may begin to indicate a serious slowing ofthe Chinese economy - watch this space.

This weeks data:
Today:
CAD: Consumer Price Index

Tomorrow:
GBP: Employment Data + Price Manufacturing Index
EUR: France, Germany and Europe Price Manufacturing Indexes
CAD: BoC’s speech
USD: Employment Statistics including important non-farm data (Oct + Nov) !! + Retail Sales

Wednesday:
GBP: Consumer Price Index
NZD: GBP

Thursday:
GBP: Interest Rate Decision !!
EUR: ECB Monetary Policy Statement + Press Conference
USD: Consumer Price Indexes

Friday:
JPY: Interest Rate Decision
GBP: Retail Sales