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Unemployment in the UK economy held steady at 4.4% in December.
Unemployment in the UK was unchanged month-on-month at 4.4% in December, avoiding the painful increase in joblessness that many economists had predicted. Average earnings meanwhile rose as expected to a three-month average of 6% including bonuses and 5.9% without bonus payments.
With US markets closed on Monday, the pound was able to capitalise on the tentatively positive platform it has built. GBP/EUR nudged up by almost half a cent and GBP/USD ended the day more than 3.5% higher than a month ago.
Bank of England governor Andrew Bailey pushed back against some of the more dire UK forecasts. In Bailey’s view, the labour market is still showing signs of softness (i.e. weakness). “The economic context is not really supporting the view that we will get more persistence in inflation”, Bailey said in an interview.
There is little overconfidence when it comes to sterling, though. Tomorrow’s inflation report could be a significant milestone in the battle to tame inflation, while rapidly developing geopolitical news makes it hard to say if the pound’s resurgence is here to stay.
After the events of the past few weeks, there is a sense in Europe is that the continent is entering a new era, one that might be vastly different on an economic and political level. Leaders and officials met for a hastily arranged summit in Paris yesterday to discuss negotiations to end the war in Ukraine. At the same time, US representatives prepared to meet their Russian counterparts in Saudi Arabia.
Germany heads to the polls in less than a week to vote in federal elections. A stormy debate between major candidates over the weekend was a succinct summation of what has been an ill-tempered campaign. For the euro, the good news is that the market-friendly alliance of the Christian Democract Union and one of the left-wing parties appears the most likely to form the next government.
GBP: Will inflation save or sink sterling?
Headline consumer price inflation is forecast to have risen again in January after falling in December. The incongruous result of that is higher inflation, while negative for the economy as a whole, might boost the pound as markets anticipate fewer interest rate cuts. That’s a discussion for tomorrow but the outlook for sterling is hard to discern.
GBP/USD: the past year
EUR: Anxiety over Trump and AfD
The euro faces an anxious wait to see who will come out on top in the German elections, with the far-right Alternative für Deutschland expected to do well. That isn’t the only factor making things move. Donald Trump’s policies (both economic and geopolitical) are making the eurozone ask where it fits into the new world order.
GBP/EUR: the past year
USD: Presidents’ Day pause
The US dollar traded in a narrow range against its rivals to start the week – the result of an extended weekend for the stock market. Trading volumes were low yesterday but should start to ramp up today and there is much to consider after one of the most remarkable periods for transatlantic diplomacy since the Second World War.
EUR/USD: the past year
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