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Starmer could face a leadership challenge (Altopix / Shutterstock)
The news that unemployment has hit 5% in the UK has increased speculation on a leadership challenge to the prime minister. With manifesto-busting tax rises likely in the Budget two weeks away today both the chancellor and her leader appear to be under threat.
Average earnings were also revealed to have fallen slightly yesterday. Although they remain at an inflationary 4.6%, taken with the rise in unemployment analysts are now pricing a December interest rate cut at 75%, with some now prophesying three quarter-point cuts in the first half of 2026.
This all hit sterling, which fell back close to another 2½ year low against the euro. That there was no similar fall against the US dollar was largely because of a vote to end the longest government shutdown in US history, which also raises the prospect of interest rate cuts there too, sooner rather than later.
This was all good news for stocks, with hopes for lower borrowing costs sending the FTSE up 2.4% on the week.
We’ll be hearing more on US interest rates from a series of speeches by FOMC rate setters today. On this side of the pond, the Bank of England’s chief economist Huw Pill will be speaking today too. He voted to keep interest rates on hold in a narrow vote last week, but what is he planning for December?
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Account manager on 020 3918 7255 to get started.
GBP: Mixed picture for sterling
Despite bad news on unemployment yesterday it wasn’t an entirely negative day for sterling, which recovered a little ground on the US dollar and the yen. Will that survive tomorrow’s GDP data though, and comments from the BoE’s chief economist this afternoon?
GBP/USD past year
EUR: Recovery against pound and dollar
A quiet period for eurozone data hasn’t stopped movement for the single currency, but yesterday was a mixed picture, with gains on the pound and US dollar but losses elsewhere. The big data event of the week is GDP on Friday.
EUR/USD past year
USD: Losses against all but the yen
There were sizeable losses for the dollar yesterday almost but not quite across the board. The cause was the likely end of the US government shutdown today. There will also be a phalanx of interest rate setters from the US Federal Reserve talking, so watch out for market movement later today.
USD/GBP past year
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