The news that unemployment has hit 5% in the UK has increased speculation on a leadership challenge to the prime minister Sir Kier Starmer. With manifesto-busting tax rises likely in the Budget two weeks away, both the chancellor and her leader’s own jobs could be under threat.
So as well as the economic threats to sterling we now have political ones too. Changes in leadership can have a serious impact on currencies: after Boris Johnson resigned GBP/EUR gained 3% over the following month and then lost 7% in the sharpest drop for sterling since the Brexit vote and pandemic.
We still seem far from that point, with all cabinet ministers pledging full support, but if you are concerned about the implications for your own upcoming transactions, do call your account manager on 020 8003 4915 and talk about locking in your exchange rate.
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.
The promise of good news for mortgage holders and business was bad news for sterling, which fell 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.
We will get the quarterly Gross Domestic Product (GDP) result early tomorrow and with the government desperately needing economic growth it will be a result keenly watched by the chancellor, PM, potential rivals, the Bank of England and the currency markets.
We will keep you informed of any large currency movements, but why not get out ahead and talk to your account manager today?
