GBP hit as employment data disappoints, all eyes on US Fed speech this evening

This afternoon saw US corporate earnings blow though expectations and JPChase CEO Jamie Dimon turn bullish on the US economy - this is all despite the US government still being shutdown due to funding negotiations continuing and yet more sabre-rattling through tariffs threats between the US and China.. Across the pond, weak UK employment data hit the pound.

GBP: This morning’s UK jobs report was mildly dovish. Private sector wage growth, a key BoE metric, undershot expectations, falling to 4.4%. The headline rise in unemployment to 4.8% will draw yet more attention to the domestic difficulties facing the UK economy, as well as a Prime Minister with a record low aproval rating. Pricing for a December interest-rate cut increased from 7bp to 9bp, and 2-year GBP swap rates are down 4bp after this morning’s release.

GBP/EUR now firmly under 1.1500 and GBP/USD struggling to regain the 1.33350 level.

USD: News that China and the US have raised tariffs on each other's vessels on Tuesday has reactivated concerns about a trade war. All eyes are drawn to Donald Trump and Xi Jinping, who should meet shortly, according to US Treasury Secretary Scot Bessent's announcement on Monday (who also said that China wants to ‘pull everybody else down’). Ahead of Powell’s speech tonight, markets widely expect the Fed to cut the policy rate twice more this year. Given the absence of key data releases, we could see an out-sized reaction to this speech.

EURO:  EUR/USD pair hovers near recent lows with upside attempts capped below 1.1550. Risk appetite remains subdued as trade tensions between the US and China flare up. German ZEW data revealed that the sentiment about the current economic situation deteriorated to its lowest levels since May. Though, the EUR pairs are not expected to be impacted before the French deputies make their decision on government censorship on Thursday. Re-appointed PM Lecornu will unveil his new budget, which will ultimately determine his chances of surviving this no-confidence vote. (Another government collapse will likely make the euro miss out on any benefits from further escalation in the US-China trade spat.

CNY: China’s Gas imports rebound, but remain below 2024 levels, which could push Gas prices higher in the European market.

This weeks data:
Tonight:
GBP: BoE speech
US: Fed Speech

Wednesday:
CNY: Consumer Data
AUD: RBA Speech

Thursday:
AUD: Employment Data
CAD: BoC Speech
EUR: Lagarde’s Speech
USD: Price and Retail Data

This week end:
EUR: Lagarde’s Speech
GBP: Bailey’s Speech

Next Week:
CNY: GDP
GBP & CAD: Price Index Data