The Daily Brief

Sterling gave up roughly 1.4% in two sessions, sliding from just under 1.345 at Tuesday's open to close Wednesday near 1.328, and sits around 1.326 this morning, its weakest level in four weeks. Very little of that move was made in Britain. Tuesday's hot US inflation report and the run of hawkish Fed commentary that followed lifted the US two-year yield 17 basis points in a single session, while the 10-year gilt yield rose only about seven basis points to 5.21% and eased slightly on Wednesday.

When one side of a currency pair reprices its rate path that sharply and the other barely moves, the pair follows the gap, and on Wednesday it kept doing so even with the US bond market closed for Veterans Day. The Bank of England has not been quiet; it has simply been priced. Monetary Policy Committee member Megan Greene said on Wednesday that it is appropriate to actively tighten policy to guard against wage growth staying elevated and firms passing costs on, a line that a month ago would have lifted the pound.

This week it barely registered, because money markets already price three further quarter-point rises by the end of next year, more than most economists expect. Governor Bailey's lecture in Zurich on Monday focused on AI valuations and cyber risk to financial stability rather than the rate path, so the Bank has offered nothing new to set against a Fed whose officials have moved from tolerating hikes to arguing for bigger ones. That leaves this morning's third-quarter GDP figures, due at 07:00 GMT, as the main domestic test. Consensus looks for growth of 0.7% on the quarter after 0.5%, and 1.9% on the year, in line with the Bank's own November projection, with September alone expected to be flat.

An in-line number would confirm that the economy entered the autumn with enough momentum to absorb the November hike without changing the pricing much; the September figure matters more, because a contraction there would hand the Committee's doves their first hard evidence that energy costs and higher borrowing rates are biting. Sell-side forecasts are already pulling apart, with one major bank looking for 1.36 by March and another for 1.30, a six-cent spread that captures how unsettled the rate story on both sides of the Atlantic has become.

At 1.326, GBP/USD sits in the lower third of its range between the early-October low near 1.318 and last week's high around 1.350, and below the 1.334 midpoint it was holding on Monday. A test of 1.318 opens if a soft September print coincides with another firm US data day, while a return above 1.334 would need both a solid GDP number and a Fed leadership that leans against a half-point move. With the dollar side of the pair doing most of the work, the balance of risk tilts towards the lower edge of the range until US rate pricing stops climbing.

In the space of a day, the Federal Reserve debate has shifted from whether to raise rates in December to how far. Governor Christopher Waller said before Tuesday's inflation data that a core reading of around 0.3% or higher would justify considering a half-point increase, warning that a quarter-point move would put the Fed's credibility at risk. Dallas Fed President Lorie Logan, a voter this year, argued for at least two more quarter-point hikes and suggested the pace could quicken this winter.

At least one major investment bank now expects a further hike in March, and Chicago Fed President Austan Goolsbee called the inflation outlook close to disturbing, so officials once counted as patient have moved alongside the hawks. The data gave them the cover. October headline CPI rose 0.4% on the month against a 0.3% forecast, and core rose 0.3% against 0.2%, its third consecutive 0.3% print, a pace that annualises well above 4%. Headline inflation cooled from September's 0.6% as the gasoline surge faded, but the persistence in core is what worries policymakers, because it suggests the energy shock is spreading into prices it should not touch.

Futures now price a December hike in full, with a small probability of 50 basis points and two further increases by next June; the two-year yield jumped 17 basis points on Tuesday to around 4.73%, its biggest one-day rise since April 2025, and the 10-year briefly traded above 5%. The Dollar Index sits around 103 this morning, its highest level in 19 months, after gaining about 1% across Tuesday and Wednesday. The second leg is the more telling: with the US bond market shut for Veterans Day, there was no Treasury trading to push the dollar higher, yet it extended its gains anyway as futures carried the rate signal.

The euro has been the main casualty given its weight in the index, and the yen sits near 160 per dollar as the Bank of Japan weighs its own December move. Today brings a full slate of Fed speakers, from Cleveland's Beth Hammack this afternoon to New York Fed President John Williams late tonight, alongside weekly jobless claims and Friday's producer prices. Around 103, the index sits roughly 0.7 points above the top of the 101.2 to 102.3 band it traded through last week.

The reference that matters is the curve: with close to 28 basis points of tightening priced for December, a quarter-point hike is fully in the price, so further dollar strength now needs a half-point move to become the base case rather than a tail risk. If Williams and the Fed leadership lean towards a gradual pace, the asymmetry favours a pullback towards 102.3; if he opens the door to 50, a sustained break above 103 has room to run. On balance the index looks stretched against what is already priced, with the risk tilted modestly towards consolidation rather than a further leg higher.

Offshore investors spent Tuesday and Wednesday unwinding the rand's post-election rally. The currency closed Wednesday's session near 16.60, its weakest since early November, after trading around 16.40 on Monday, a slide of more than 1% in two sessions. Unlike last Friday, when bonds held firm while the currency softened, this time local debt was sold too: the 10-year yield climbed to around 8.61% from close to 8.44% at the end of last week, lifting off its lowest level in three months. When the currency and the bond market weaken together, the message is that foreign holders are reducing their exposure to South African assets, not simply adjusting a hedge.

The trigger was the interest rate differential rather than anything domestic. With the repo rate at 7.25% and the Fed funds rate at 4.00%, the rand's 325 basis point cushion was already set to narrow to 300 after a December Fed hike. Futures now price two further US increases by June, which would leave the gap at 250 basis points by the middle of next year if the Reserve Bank holds throughout, a meaningful erosion of the carry that has underpinned the rand for most of this year. Higher US yields also weighed on the precious metals behind South Africa's export earnings, with gold slipping back below $4,000 an ounce.

The domestic data offer little to push back with. Unemployment rose to 33.7% in the third quarter, its highest in more than four years, and manufacturing output fell 3.5% on the year in September, so any case for the Reserve Bank to tighten again on 19 November rests on inflation rather than growth. Economists remain split: one major local bank still expects a quarter-point hike, while others argue that the fuel levy relief and softer September inflation of 4.5% leave room to hold. October inflation, due the day before the decision, is now the swing factor, and this morning's September mining figures, after a 12.7% annual fall in August, will show whether output is stabilising.

At 16.60, the rand sits just on the weaker side of the 16.57 midpoint of its range between last Thursday's 16.34 and the 16.80 upper end. A Reserve Bank hold on 19 November followed by a Fed hike in December would cut the rate cushion to 300 basis points with no compensation, and that is the scenario that puts 16.80 back in play; a hike from Pretoria, or a softer turn in US data, is what a return towards 16.34 would need. Until one of those arrives, the asymmetry leans towards the weaker half of the range.

Reports overnight that Nvidia's board is preparing to decide the future of chief executive Jensen Huang, following an internal investigation into his conduct, sent the shares down about 8.6% in after-hours trading, wiping out Wednesday's 2.9% rebound and more. Nasdaq 100 futures are around 0.9% lower and the S&P 500 is near 7,590, down 0.4% this morning. The company has not commented on the reports and has no named successor, which is why the reaction is so sharp: Nvidia supplies the bulk of the chips behind the AI build-out and has been the market's single largest source of earnings momentum.

The episode lands on a market that was already exposed. Nvidia had lost more than $450bn in value since the investigation began, and Wednesday's rally, led by a strong quarter and raised outlook from CoreWeave, showed how much of the index's resilience rests on confidence in the AI trade. That makes this a macro story as well as a corporate one: AI investment has been a pillar of US capital spending and growth, so a wobble in the sector meets rising discount rates at the same moment. Equities absorbed hawkish Fed news earlier this week because earnings optimism held; if that optimism cracks, there is less to offset tighter money.

Elsewhere the picture is calmer. Brent is trading near $91.80, down about 1% this morning and some 13% lower than a month ago, as Saudi output jumped 26% in October to its highest since the war began and flows from the Gulf continue to recover. Diplomacy has not moved, with Tehran insisting it will not give up any enriched nuclear material and that sanctions and the naval blockade must go before the Strait of Hormuz reopens, but the market is now pricing supply rather than headlines. Gold has slipped back below $4,000 as yields climb, and the yen sits near 160 per dollar, both consistent with a world in which US rates set the tone.

At around 7,590, the S&P 500 sits roughly 3.3% below its October record of 7,845, with Nvidia's results on Tuesday the next fixed point for the AI trade. The more useful frame for importers is oil in their own currency: near $92, a barrel costs about R1,520 or £69, both roughly 13% cheaper than a month ago, because sterling and the rand have lost little ground against the dollar over that period. That relief is real but contingent, since a further leg of dollar strength on Fed repricing would start to claw it back, and with Brent already in the lower half of its $73 to $118 war range the room for the barrel to fall is narrowing faster than the room for the dollar to rise. The balance of risk for energy-exposed costs has quietly shifted from the commodity to the currency.