Rainstone FX Ltd 2nd November 2026
Last week's run of central bank decisions gives way to another important week for markets, with the Bank of England, the US elections and the latest US jobs report all due in the coming days. The pound starts the week near its strongest level against the euro in well over a year, while the dollar is a little softer as hopes of diplomacy with Iran reduce demand for the US currency.
Market Recap
EUR: The euro had a difficult end to October. The ECB left rates unchanged at 2.50% on Thursday, as expected, but the decision was overshadowed by the news that President Christine Lagarde will leave the ECB in February, nine months earlier than planned. Concerns around France's finances have not gone away, and weaker German retail sales alongside slowing eurozone growth have offered little support. EUR/USD starts the week around 1.12, with markets still favouring the possibility of an ECB rate rise in December.
GBP: Sterling remains on the front foot. GBP/EUR is close to 1.20, its strongest level in well over a year, while GBP/USD is trading around 1.34, its highest level since mid-September. Last week's UK Budget passed with little market reaction, as the government's borrowing plans were broadly in line with expectations and fiscal headroom remained around £15 billion.
USD: The Federal Reserve held rates at 3.75% to 4.00% last week, although two policymakers voted for an immediate increase. Markets continue to see a December rate rise as likely, but the dollar has started the week softer as oil prices ease and geopolitical tensions show signs of cooling.
Elsewhere: The Bank of Canada raised rates to 2.50%, its first increase since 2023, while the Reserve Bank of New Zealand signalled that another rise remains likely in December.
Key Events This Week
Monday: UK and Eurozone manufacturing surveys (PMIs) Tuesday: RBA decision, US elections, US job openings Wednesday: Eurozone inflation, US private sector employment (ADP) and US services survey (ISM) Thursday: Bank of England decision and Governor Bailey's press conference, Canadian budget Friday: US jobs report, Canadian jobs data
Thursday is the key event for sterling. The Bank of England is widely expected to raise rates from 3.75% to 4.00%, but that outcome is already largely priced into markets. The focus will be on what Governor Andrew Bailey says about the path ahead. If he pushes back against expectations of further rate rises, sterling could come under pressure. If the Bank maintains a firmer tone, the pound may find further support.
In the US, Tuesday's elections could influence expectations around future spending and borrowing, although a divided Congress would make major policy changes harder to deliver. Friday's jobs report is expected to show between 55,000 and 63,000 new jobs were created in October, following September's 29,000 increase. The figures will play an important role in shaping expectations ahead of the Fed's December meeting.
Eurozone inflation on Wednesday is the biggest release for the euro. Inflation stood at 3.8% in September, and some economists believe it could move above 4%, strengthening the case for an ECB rate rise later this year.
For the Australian dollar, attention turns to Tuesday's RBA decision. Markets expect a 0.25% rate rise to 4.85%, which would be the highest level since 2008. As both the RBA and BoE decisions are largely anticipated, guidance from policymakers may have a bigger impact than the decisions themselves.
Rainstone Insight
Last week showed once again that the headline decision is often only part of the story. The ECB left rates unchanged as expected, yet the euro weakened as markets focused on Lagarde's departure and ongoing concerns around France. The Fed also held rates, but attention quickly shifted to what policymakers might do next.
This week is likely to be similar. The Bank of England move is largely anticipated, so the message around future policy could prove more important than the rate rise itself.
With sterling trading near its strongest levels against the euro in over a year, now could be a useful time to review any upcoming currency requirements. Whether you're making a business payment, purchasing property abroad or planning a personal transfer, having a plan in place before major events can help take emotion out of the decision-making process.
If you would like support with your international payments, get in touch with the Rainstone team. We are watching the markets closely, so you do not have to.