Dubai, UAE, 03 November 2025: The Federal Reserve “hawkish cut” last week seems to have taken markets by surprise. Clearly, further cuts are far from a consensus view in the central bank, and all asset classes reacted to the surprise in the traditional ways. Interest rates shot up, credit spreads widened, stocks sold off, and the dollar strengthened. The dollar gained ground last week against every major currency worldwide. The week’s biggest loser was the British pound, as the Bank of England seems to be moving the opposite way from the Fed and is now signalling further easing. An interesting aspect of the market’s reaction to the Fed was the relative outperformance of most major emerging market currencies, most of which sold off less against the greenback than G10 currencies.
Enrique Díaz-Álvarez, Chief Economist at Ebury said: “There is still no end in sight to the US government shutdown, so no significant economic news is expected from the US. The only exception will be the private sector counterpart to the payroll report, the ADP jobs number on Wednesday, which will receive an unusual amount of attention in the absence of official news. The Bank of England meets Thursday, and Eurozone retail sales will be released Thursday. As usual in the Eurozone, these numbers will be from September and won’t shed much light on recent economic trends.”
GBP
Bleak UK productivity trends are expected to cause a downgrade in growth expectations, which will, in turn, force additional fiscal tightening in the budget to be announced November 26th. Some Bank of England officials have been making dovish noises, and markets are now pricing in a 30% chance of a cut at its Thursday meeting. We still think the hawks will carry the day and rates will be left unchanged, but there will likely be a number of dissents voting for a cut. Meanwhile, Sterling’s steady underperformance is starting to create a buying opportunity, given high UK rates and resilient economic data.
EUR
A modestly positive surprise in third-quarter GDP growth from the Eurozone confirmed the upward trend in business sentiment surveys. Meanwhile, last week’s uneventful meeting of the ECB confirmed that the rate-cutting cycle in the Eurozone is over. Recent Fed hawkishness has sent the euro towards the low of the 1.14-1.19 range that has held since June. As the Eurozone economy remains resilient, and as the effects of the massive German fiscal stimulus plan begin to be felt, we think that the common currency is becoming a buy around these levels.
USD
Although the Federal Reserve cut rates as expected last week, the message from Powell was unmistakably hawkish. He made it clear that another cut at the next meeting in December is far from a forgone conclusion. Further hawkish noises came later in the week from Federal regional presidents who will be rotating into a voting position in 2026, highlighting the disconnect between Fed officials and the market regarding the timing and size of any further cuts. As we wait for the Federal government to reopen and resume publishing economic data, that looming conflict between the Trump administration and the Federal Reserve is what will likely come back into focus.
About Ebury
Ebury is the leading payments specialist that helps small- and medium-sized businesses (SMEs) operate and grow internationally. It is a global fintech company with a comprehensive and tailored offering to enable businesses to make and receive cross-border payments, open currency accounts, and manage currency risk.
Founded in 2009 by Juan Lobato and Salvador Garcia in London, Ebury now has over 1,800 employees serving more than 21,000 customers across 40 offices in 29 markets. We have capabilities in 130+ currencies. Ebury has grown rapidly and profitably in recent years.
In FY 2025, revenues rose to £286.5 million, and EBITDA grew to £44.9 million. It is regulated by the Dubai Financial Services Authority (DFSA) in the UAE and backed by top-tier investors, including Banco Santander, who have a majority share ownership.
