Fresh call for UK tax rises, major US job downgrade sees dollar firm up

Following Monday’s dips, the dollar firmed up even as significant US job losses were revealed. It gained 0.25% on the pound and 0.5% on the euro. The euro’s decline seems to be driven by the resignation of another French Prime Minister and the news that France’s debt interest rates had surpassed Italy’s.

More organisations are demanding Chancellor Rachel Reeves to adjust or even abandon her fiscal rules, with the head of the Confederation of British Industry calling for raises on income tax, national insurance or VAT.

With the Chancellor’s autumn budget set for November 26 and the increasing signs that Reeves will need to both raise taxes and cut spending to deal with the government’s debt deficit, the CBI’s chief executive, Rain Newton-Smith has said that “the world is different from when Labour drafted its manifesto” so it must also change its plans.

The call comes as Prime Minister Keir Starmer sets up a budget board to create a dialogue between the government and British corporations.

With more than two months to go until the budget, the lack of clarity on whether Reeves will raise taxes on businesses or individuals will keep the trajectory of the pound uncertain.

Over in the US, the annual revision of US jobs revealed that between April 2024 and March 2025, the country added more than 900,000 fewer jobs than initially reported. Not only does this paint a different picture to the final months of Joe Biden’s presidency, but it also suggests the US labour market is in a much worse position than previously thought.

A weak job market raises expectations that the Federal Reserve will cut interest rates when they meet next week and that expectation has seen the dollar firm up, gaining 0.25% on the pound and 0.5% on the dollar.

In Europe, as French Prime Minister François Bayrou resigned from government following his failed confidence vote, the markets saw the interest rate on French bonds surpass Italy’s for the first time. This shift hints at a growing debt problem in Europe, with several major EU members facing significant borrowing costs.

In response to the news, the euro slipped against both the pound and dollar.

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GBP: More calls for tax rises

The pound fell behind the dollar on Tuesday, losing 0.25% in exchanges, but it gained 0.25% on the euro. There is a growing call from all sides for Chancellor Rachel Reeves to break from her fiscal rules, with the chair of the CBI pushing for tax rises on individuals.

GBP/USD past year

EUR: Euro dip following French resignation and debt increase

The euro lagged the pound and dollar on Tuesday, losing 0.25% against the former and 0.5% against the latter. The falls followed the resignation of French Prime Minister François Bayrou and the news that France’s bond rates had surpassed Italy’s.

EUR/USD past year

USD: Significant job downgrade sees dollar firm up

The dollar gained 0.25% on the pound on Tuesday and 0.5% on the euro. This is despite new labour data suggesting the US opened 900,000 fewer jobs last year than previously thought. While bad for the job market, the data puts fresh pressure on the Federal Reserve to cut interest rates.

USD/GBP past year

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