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Jamie Jemmeson
December 14, 2021

UK Unemployment Rate Continues to Fall

Sterling Remains Under Pressure Amidst Risk Off Tone


It was a quiet day yesterday with only the Bank of England’s (BoE) Governor Bailey stating that he did not expect that Omicron would not cause market turmoil. With the BoE meeting scheduled on Thursday, there were no direct comments on monetary policy ahead of it.

The latest evidence also suggested that there had been a sharp drop in the use of public transport, as governments guidance again called on employees to work from home – the focus at this stage is on accelerating the vaccine booster programme.

Meantime, Prime Minister (PM) Johnson’s position continues to be under pressure as the Labour Party takes a lead across multiple polls. There are several reports in the press about politicians preparing themselves for a leadership battle. If the loss in the polls also continues this could add uncertainty to the Sterling next year.

This morning, the latest UK labour-market report recorded a larger than expected decline in jobless claims with the unemployment rate declining to 4.2% from 4.3%. While headline average earnings slowed to 4.9% from 5.8%, but above expectations of 4.6%. 

US Dollar Remains Supported ahead of the Federal Reserve (Fed) Meeting

The US Dollar remained well supported ahead of the Federal Open Market Committee’s (FOMC) two-day policy meeting to conclude on Wednesday. The Fed is still expected to accelerate the pace of tapering its asset purchase programme which would enable asset purchase to end in spring – paving the way for an interest rate increase in March.

On Monday, the US Dollar Index moved higher towards the mid-96.00 level as the risk-averse market environment seemed to be helping the greenback find demand as market sentiments remain subdued. It was also reported that at least 20 manufacturing companies in China’s Zhejiang province have shut down their operations due to the spread of Omicron.

Looking at the economic calendar today, investors’ attention will turn to November’s Producer Price Data for signs that inflationary pressures are easing.

Meanwhile, the NFIB small business survey for November will provide an update on business confidence.

Tensions Rapidly Escalate between the EU and Russia

The Euro came under some pressure yesterday amid increased tensions between Russia and the EU over the Ukrainian border. Russia threatens to deploy intermediate-range nuclear missiles in Europe should NATO fail to rule out using them.

Yesterday, EU chiefs and Boris Johnson warned Moscow that it would face serious consequences if it were to invade Ukraine with growing convictions within the EU that Russia is preparing for an all-out war. In response, the EU has agreed to impose sanctions on the Wagner Group, a Russian private military firm.

In addition, there are increasing concerns over the possible rapid spread of Omicron across the Eurozone, which could pose further risk to economic growth and recovery across the bloc.

Looking ahead to today, it is a baron Macroeconomic calendar for the Eurozone. Industrial production’s month-on-month (MoM) figures are due this morning, with the forecast for production figures to read 1.2% versus -0.2% previously. However, this is not expected to provide significant direction for the Euro.

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