The news that unemployment has hit 5% in the UK has increased speculation on a leadership challenge to the prime minister. With manifesto-busting tax rises likely in the Budget two weeks away today both the chancellor and her leader appear to be under threat.
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.
This all hit sterling, which fell back 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.
This was all good news for stocks, with hopes for lower borrowing costs sending the FTSE up 2.4% on the week.
We’ll be hearing more on US interest rates from a series of speeches by FOMC rate setters today. On this side of the pond, the Bank of England’s chief economist Huw Pill will be speaking today too. He voted to keep interest rates on hold in a narrow vote last week, but what is he planning for December?
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