Currency Note

UK unemployment rate edges down but remains high overall

By Alex Bennett June 13th, 2023

Several key economic releases have been released today.

Market watchers can expect a flurry of key economic data to be released over the course of today. We’ve just seen the final annual inflation rate for Germany, which was confirmed at  the 14-month low of 6.1% in May, in line with forecasts.

UK unemployment has also been released this morning. The rate for the February-April period edged down slightly to 3.8, however it still sits very close to the January-March period’s over one-year high of 3.9%.

Yesterday was a choppy day for sterling against the euro and US dollar as markets awaited key economic data. Compared to this time last week, the pound remains strong/the pound has weakened.

UK borrowers could face higher mortgage rates ahead due to market turbulence. On Monday Santander became the latest lender to temporarily withdraw new deals due to “market conditions”. A statement from the bank said it was “temporarily withdrawing all our new business residential and buy-to-let fixed and tracker rates at 7.30pm on Monday 12 June”.

On the data front, up next for euro-watchers is the Centre for European Economic Research (ZEW)’s economic indicators, for both Germany and the eurozone as a whole.

The index measures how optimistic (or not) analysts are about expected economic developments over the next six months. The survey itself covers up to 350 financial and economic analysts, so the release at 10am will be one to watch.

More than 2,000 security workers at Heathrow airport have postponed the first two days of strike action announced last week, after receiving an improved pay offer. Strikes are now set to go ahead on 24 and 25 June instead.

Across the pond, monthly and yearly US inflation will take the spotlight at lunchtime today, with both rates expected to ease gently again. All eyes will be on the upcoming data from the U.S. Bureau of Labor Statistics –  especially as it precedes the Federal Reserve’s (Fed’s) interest rate decision on Wednesday. A dip in line with expectations is expected to strengthen the Fed’s case for a pause in its tightening cycle.

US equities rose yesterday, ahead of the country’s inflation data. The Dow Jones climbed 20 points and the S&P 500 was up 0.3%. The Nasdaq also rose 0.4% as investors seemed hopeful that inflationary will ease, supporting the case for a pause in the Fed’s interest rate hikes this wee

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GBP: BoE’s Bailey and Dhingra to speak

The Bank of England’s (BoE’s) governor, Andrew Bailey, and monetary policy committee member, Swati Dhingra, will both deliver speeches today.

Their speeches follow  BoE monetary policy committee (MPC) member, Jonathan Haskel’s, reiteration in The Scotsman yesterday, that interest rate rises “cannot be ruled out” amid decades-high inflation. Investors will be listening intently for any hawkish comments as these could potentially boost the pound.

GBP/USD over the past year

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EUR: Markets poised for ECB’s Enria’s speech

Chair of the Supervisory Board of the European Central Bank (ECB), Andrea Enria, will deliver a speech at 10:45 am today. Markets will be listening for any clues on ECB policy, ahead the big interest rate decision this Thursday.

USD: Core inflation expected to cool

As well as monthly and yearly inflation, core consumer price inflation for the US will also be released today.

Core inflation, excludes the more volatile items such as food and energy. According to the U.S. Bureau of Labor Statistics , the rate edged down to 5.5% in April 2023, as expected, from 5.6% the month before. This afternoon, the rate is forecast to fall to 5.4%.

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