Markets This Week: Inflation, Jobs and Policy Moves
Rates & Inflation Overview
| Region | Interest Rate | Inflation |
|---|---|---|
| UK | 4% | 3.8% |
| EU | 2.15% | 2.1% |
| US | 4% | 3% |
Key Market Updates
- Rachel Reeves was planning tax rises to address a £41bn fiscal shortfall but may now scrap the proposal (as of 26 November).
- GBP is the worst-performing G10 currency following reports that Reeves is reconsidering income tax increases.
- UK interest rates are now at their lowest level in over two years, with markets pricing an 80% chance of another Bank of England cut.
- UK unemployment has risen to 5%, the highest level since the pandemic.
- German exporters are investing heavily in China despite government caution.
- Keir Starmer faces internal doubts following the income tax U-turn.
- Trump plans to cut tariffs on beef, tomatoes, coffee, and bananas to reduce grocery costs.
- The U.S. and Switzerland have agreed to a 15% tariff deal.
- Rachel Reeves is expected to cap annual pension salary sacrifice at £2,000 before NI becomes payable, raising an estimated £2bn.
United Kingdom (GBP)
Wednesday 12th – Consumer Price Index (07:00)
Leading indicator of inflation.
- Previous: 3.8%
- Consensus: N/A
- Note: Core CPI is expected to drop by 0.1%.
Market Impact:
A further decline would typically weaken the GBP. The UK remains around 1.8% above the 2% inflation target. A rise would increase pressure on the Bank of England ahead of future policy decisions.
Friday 21st – Retail Sales (07:00)
Measures changes in retail-level goods sold and is a key gauge of consumer spending.
- Previous: 1.5%
- Consensus: N/A
- MoM: Expected to fall from 0.5% to 0.1%.
Market Impact:
Stronger retail sales typically support the GBP, signalling healthy consumer demand. A weaker reading would indicate softer spending and potential GBP downside.
Eurozone (EUR)
Wednesday 19th – Core HICP (10:00)
Inflation indicator excluding volatile items such as food, energy, alcohol, and tobacco.
- Previous: 2.4%
- Consensus: 2.4%
Market Impact:
An upside surprise would strengthen the EUR by increasing pressure on the ECB. A weaker figure would likely weigh on the EUR.
United States (USD)
Thursday 20th – Nonfarm Payrolls (13:30)
Measures the number of new jobs created in the U.S. in non-agricultural sectors.
- Previous: 22K
- Consensus: 50K
Market Impact:
A stronger print would typically support the USD as it reflects economic strength and rising consumer activity.
Thursday 20th – Unemployment Rate (13:30)
Percentage of the labour force not in paid employment but actively seeking work.
- Previous: 4.3%
- Consensus: 4.3%
Market Impact:
Expected to remain unchanged. Limited impact unless it unexpectedly drops, which would be USD-supportive and aligned with the expected rise in NFP.
Why this matters
This week’s data releases could spark sharp moves in currency markets. For businesses and individuals with upcoming FX needs, even small shifts can have a meaningful impact on costs and margins. Our team can help you manage the risks and position yourself to benefit from opportunities.
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