The UK’s unemployment rate increased from 4.6% to 4.7% in the three months to May, the highest level since July 2021. Average earnings (both including and excluding bonus payments) increased at a rolling three-month average of 5% – slightly below expectations.
This means the Bank of England now has two competing trends to balance at its next meeting. The first is inflationary pressures in consumer goods. The second, as we have seen this morning, is the clear softening of the labour market, a trend that is likely to prove deflationary in the long term.
Wednesday brought mixed results for the pound, which made steady progress against the euro but required a bombshell to reverse its losses against the US dollar (more on that below).
The US producer price index (PPI) was unchanged in June from the month prior. Notably, the price of traveller accommodation services dropped by over 4%, suggesting some decline in tourism demand in the wake of ongoing geopolitical uncertainty. The price of goods and gasoline moved higher, meanwhile.
This data was soon overshadowed by a suggestion that Trump had floated the idea of sacking Fed chair Jerome Powell to Republicans in Congress. The US dollar sank and the yield on treasury debt soared in the wake of the news report, which also claimed officials were supportive of the idea. The White House denied the president planned to axe Powell soon.
France could soon face a debt crisis similar to that experienced by Greece in 2008, according to François Bayrou. The unpopular prime minster is so worried by the deficit that he proposed a series of stark measures – including spending cuts, tax rises and the scrapping of two national holidays. “This is our moment of truth”, Bayrou warned in a plea to lawmakers during budget negotiations.
While Donald Trump’s trade war has left many deriding his penchant for delays, his aggressive strategy has reaped more rewards than it might appear. Analysis by the Financial Times showed that the United States has raised more than $50bn in tariff revenues at little cost. Thus far, only China and Canada have implemented retaliatory levies on American exports.
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