The euro made up some ground against the dollar midday yesterday to touch off $1.1550 , but retreated again later on. That left the euro slightly up on the day at around $1.1525 this morning. This halted the dollar’s advance which had gained about 0.9% last week. There was a limited amount of data to move markets, just German business confidence which disappointed somewhat. Similarly, the euro gained on sterling, back to above 88p for a time but lost those gains back down to just below 88p this morning.
Yesterday’s Events
Government bond yields fell on both sides of the Atlantic. A couple of Fed members were out talking up the chances of rate cut next month, helping US 10-year yields to move to just over 4%, down 4bps. While in euro area, with little data or news, yields ticked down a basis point or two with German 10-year yields down just 1bp to just below 2.7%. In equity markets, there was a very strong start to the week, with investor confidence improving following jitters last week. The S&P 500 rose 1.5% to take the index back to above 6,700 for the first time in 6 days.
The German IFO sentiment index was poor in November, a sign that the German economy – particularly in manufacturing – is not robust. The current assessment ticked up marginally, to 85.6 from 85.3, but the real pessimism was in expectations which came in at 90.6 from 91.6. The IFO institute said that businesses have ‘little faith in a recovery’ with the manufacturing outlook being ‘significantly hit’. While increases in government infrastructure spending should boost growth in the Euro Area’s largest economy next year, which should help manufacturing and construction, this data shows that there is still a lot of concern within the business community that any uptick in activity may be temporary and underlying structural issues will remain. The final estimate of German GDP data for Q3, released this morning, confirmed that quarterly growth was flat in Q3 though it’s up 0.3% year-on-year. It confirmed the soft underbelly of the recovery with household consumption falling by 0.3% on the quarter, the weakest since Q3 of 2023, exports down 0.7% and just investment and government spending expanding.
Fed Governor Christopher Waller said that he would argue for a rate cut in December. He said his concern is ‘mainly the labour market’ so he would ‘advocate for a rate cut at the next meeting’. Waller, who reportedly is on the short list to be the next Fed chair, said that most private sector data indicates the jobs market is soft and job gains were concentrated in a small number of sectors which is ‘not a good sign’. Waller said he was less concerned about inflation, as he thinks the tariff inflation impact will be one-off and not that big. Waller also said that post January the Fed could go ‘meeting by meeting’ to analyse data and make monetary policy decisions. Separately, San Francisco Fed President Daly, who is not a full voting FOMC member until 2027, said the labour market was ‘vulnerable’ and, while the disagreement among Fed members reflects uncertainty, she favours a rate cut immediately in December and said the Fed ‘should not hold off out of fear’. The market moved to price in a greater chance of a rate cut in December, which is now up to 75%.
The Day Ahead
On the data front today, it’s all about the US where we get the Philly Fed non-manufacturing, retail sales, PPIs, conference board consumer confidence and house market data. Speakers due out include ECB Villeroy, Escriva and Cipollone.
Today's Talking Points 25.11.2025
Market Commentary
The euro made up some ground against the dollar midday yesterday to touch off $1.1550 , but retreated again later on. That left the euro slightly up on the day at around $1.1525 this morning. This halted the dollar’s advance which had gained about 0.9% last week. There was a limited amount of data to move markets, just German business confidence which disappointed somewhat. Similarly, the euro gained on sterling, back to above 88p for a time but lost those gains back down to just below 88p this morning.
Yesterday’s Events
Government bond yields fell on both sides of the Atlantic. A couple of Fed members were out talking up the chances of rate cut next month, helping US 10-year yields to move to just over 4%, down 4bps. While in euro area, with little data or news, yields ticked down a basis point or two with German 10-year yields down just 1bp to just below 2.7%. In equity markets, there was a very strong start to the week, with investor confidence improving following jitters last week. The S&P 500 rose 1.5% to take the index back to above 6,700 for the first time in 6 days.
The German IFO sentiment index was poor in November, a sign that the German economy – particularly in manufacturing – is not robust. The current assessment ticked up marginally, to 85.6 from 85.3, but the real pessimism was in expectations which came in at 90.6 from 91.6. The IFO institute said that businesses have ‘little faith in a recovery’ with the manufacturing outlook being ‘significantly hit’. While increases in government infrastructure spending should boost growth in the Euro Area’s largest economy next year, which should help manufacturing and construction, this data shows that there is still a lot of concern within the business community that any uptick in activity may be temporary and underlying structural issues will remain. The final estimate of German GDP data for Q3, released this morning, confirmed that quarterly growth was flat in Q3 though it’s up 0.3% year-on-year. It confirmed the soft underbelly of the recovery with household consumption falling by 0.3% on the quarter, the weakest since Q3 of 2023, exports down 0.7% and just investment and government spending expanding.
Fed Governor Christopher Waller said that he would argue for a rate cut in December. He said his concern is ‘mainly the labour market’ so he would ‘advocate for a rate cut at the next meeting’. Waller, who reportedly is on the short list to be the next Fed chair, said that most private sector data indicates the jobs market is soft and job gains were concentrated in a small number of sectors which is ‘not a good sign’. Waller said he was less concerned about inflation, as he thinks the tariff inflation impact will be one-off and not that big. Waller also said that post January the Fed could go ‘meeting by meeting’ to analyse data and make monetary policy decisions. Separately, San Francisco Fed President Daly, who is not a full voting FOMC member until 2027, said the labour market was ‘vulnerable’ and, while the disagreement among Fed members reflects uncertainty, she favours a rate cut immediately in December and said the Fed ‘should not hold off out of fear’. The market moved to price in a greater chance of a rate cut in December, which is now up to 75%.
The Day Ahead
On the data front today, it’s all about the US where we get the Philly Fed non-manufacturing, retail sales, PPIs, conference board consumer confidence and house market data. Speakers due out include ECB Villeroy, Escriva and Cipollone.
Tel: 1800 30 30 03 / +353 (0)1 790 0000