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 Democrat Union and one of the left-wing parties appears the most likely to form the next government.
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