Slight Retreat in the Dollar and A Razor-Thin Bank of England Interest Rate Decision – Currency Thoughts
Slight Retreat in the Dollar and A Razor-Thin Bank of England Interest Rate Decision
November 6, 2025
The stepped down a little in overnight trading, losing 0.3% against the euro and yen, 0.2% relative to the Swiss franc and sterling, and 0.1% vis-a-vis the Canadian and Australian currencies. Alternatively, South Korea’s won lost 0.4% against the dollar and even more versus the yen.
Ten-year sovereign debt yields rose three basis points in Japan but slipped two basis points in the United States and a basis point in Great Britain.
Gold and oil prices appreciated 0.7%, but Bitcoin dropped 1.1%.
Asian equities extended yesterday’s upward momentum in North America. Share prices closed up 2.1% in South Korea, 1.3% in Japan and Singapore, and 1.0% in China, but the U.S. stock futures prior to the open pretty much stalled. In Europe, the German, French and British stock exchanges are down a touch.
Thursday’s economic menu included more purchasing manager surveys from October, a disappointing reading for retail sales in the euro area, and a number of central bank interest rate decision, headlined by a 5-4 vote at the Bank of England not to ease again just yen.
Japan’s composite purchasing managers index was revised from an initial reading of 50.9 to a 2-month high of 51.5. An initial 0.7-point estimated drop in the services PMI got revised to show just a 0.2-point decline to 53.1, a 2-month low.
India’s composite PMI was also revised higher. Although at a 5-month low, 60.4 conveys continuing robust momentum and was not far from the all-time record of 63.2 recorded in August. India’s services PMI of 58.4 was also at a 5-month low.
Russia’s composite PMI had registered sub-50 scores for four straight months including a 35-month trough of 46.6 in September but recovered to 50.2 in October. This first sign of expansion since July, however muted, was aided by a rise in Russia’s services PMI to 51.7 from 47.0.
Purchasing manager construction survey results were also published from the U.K. and Euroland economies today. At 44.1 in October versus 46.2 in the prior month, the British index had not shown a deeper recession since the early months of the 20202 Covid pandemic. Euroland’s Construction PMI of 44.0 last month also printed well below the 50 neutral threshold and showed the weakest pulse since February. Within Euroland, a seven-month low of 42.8 in Germany and a 3-month low of 39.8 in France outweighed Italy’s 7-month high of 50.7.
Retail sales in the euro area under-performed modest expectations in September, falling month-on-mont for the third straight time and this time by 0.1%. Sales in the third quarter were just 0.1% firmer than in 2Q, and September’s 1.0% advance from a year earlier was the smallest 12-month increase in 14 months.
German industrial production bounced 1.1% in September after August’s plunge of 3.7%, leaving the third quarter 0.8% below the prior quarter’s level. Compared to a year earlier, German production fell 1.0% in September and by 1.1% in 3Q. Spanish industrial production climbed 0.3% in September but recorded its smallest on-year advance (1.7%) in four months. Czech industrial production increased 1.1% in September and 0.4% year-on-year.
Having been most recently raised in June, the Central Bank of Brazil‘s Selic interest rate was left unchanged at 15.0%. The level compares with 10.5% maintained from May 2024 until September 2024. Brazilian CPI inflation ticked marginally upward in September and has exceeded 5.0% since February versus 3.7% in April 2024. “The current scenario, marked by heightened uncertainty, requires a cautious stance in monetary policy. The Committee evaluates that maintaining the interest rate at its current level for a very prolonged period will be enough to ensure the convergence of inflation to the target.”
At 3-month intervals, five previous 25-bp rate cuts from August 2024 to and including August 2025 had lowered the Bank of England Bank Rate to 4.00% from 5.25% at peak. Analysts had not been anticipating a sixth reduction at the November meeting, which coincides with the publication of the Bank of England’s quarterly-produced Monetary Policy Report, but the 5-4 voting margin was narrower than anticipated after a 7-2 vote at the October MPC meeting. Members Breeden and Ramsden joined Dhingra and Taylor, who had also favored a 25-basis point cut in the previous meeting. The majority
placed greater weight on risks of persistence in inflation, requiring more prolonged monetary policy restriction. While there had been some progress in underlying disinflation, these members were concerned that this could stall, as they placed particular weight on the risk of higher inflation expectations or structural shifts leading to inflation persistence. One member in this group (Andrew Bailey) judged that the overall risks to medium-term inflation had moved down to become more balanced recently. But there was value in waiting for further evidence.
The Bank of Norway’s policy interest rate is also 4.0%, and officials likewise left such unchanged. That closer to peak (4.5% from December 2023 until an initial cut this past May followed by another in July) than in the British instance. Noting geopolitical uncertainty, inflation that still exceeds target, and a somewhat weaker-than-anticipated krona, a release statement opines, “a restrictive monetary policy is still needed. Inflation is still too high. an overly tight monetary policy stance could restrain the economy more than needed to bring inflation down to target. The policy rate forecast presented in September was consistent with one rate cut per year in the coming three years.”
The Czech National Bank 2-week repo rate of 3.5% since May was also kept unchanged. This level is half the peak rate of 7.0% during the second half of 2022. Inflation of 2.5% and GDP growth of 0.7% on quarter and 2.7% on year were not seen warranting a change in the monetary stance.
Consumer price inflation in Cyprus has been negative since May, but October’s on-year dip of 0.3% was the second smallest of the streak.
Japanese average earnings were 1.9% higher than a year earlier in September, but when adjusted for inflation, this measure of wage growth (-1.4%) was still a source of concern to central bank officials.
The Swiss jobless rate ticked up to 2.9% in October from 2.8% in September and 2.5% in October 2024, but the seasonally adjusted unemployment stayed at 3.0% last month.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England, Bank of Norway, Central Bank of Brazil, Central Bank of Malaysia, Czech National Bank, Euroland retail sales, German industrial production
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