Unemployment in the UK was unchanged from the month prior at 4.4% in January. This sets the scene for the Bank of England’s interest rate decision this afternoon. Bank members are expected to keep interest rates at 4.5% and caution against quicker cuts as price rises display an unwanted comeback.
Average earnings are another part of this equation. UK workers secured an average wage boost of 5.8% (including bonuses) and 5.9% (excluding bonuses) in the three months to January. Both of these numbers were in line with or even a shade below expectations.
GBP/EUR climbed to its highest level this week on Wednesday. Both the pound and the euro shed a little value as markets braced for the Federal Reserve in the evening, an event that brought not only the usual press conference, but also the latest series of economic projections for the American economy.
As expected, the Federal Reserve left interest rates unchanged at 4.5%. However, the real intrigue was focused on chair Jerome Powell. In his press conference, Powell stressed the inflationary impact of trade tariffs as he unveiled a new set of projections that showed higher inflation and lower growth than previously thought. GBP/USD gained some ground in the aftermath but lost much of that in the overnight session.
Another busy, bewildering day in geopolitics saw Donald Trump join a phone call with Volodymyr Zelenskyy. Both leaders agreed to a limited temporary ceasefire that would see both Ukraine and Russia suspend strikes on energy infrastructure.
In a blow to any British readers who may have topped up their ISAs with home-grown defence stocks, the European Union (EU) has agreed to exclude British manufacturers from purchases made in its €150bn rearmament fund, along with companies based in America and Turkey. Those countries can all get around the ruling should they decide to make a defence pact with the EU.
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