• richard evans

UK employment numbers keep pressure on BoE to raise rates

Good morning


US markets were closed yesterday but that didn’t stop US 10 year yields ticking higher to 1.85% on interest rate talk. Four rate rises this year are now priced in and as I mentioned yesterday there are some who think we could see even more. Also still talk that the first rise could be larger than 25bps, perhaps 50 or even 75bps. US dollar hasn’t really reacted against the majors although the combination of a hawkish Fed and dovish PBoC has seen USDCNY climb higher to around 6.35 having been down to 6.3375 or so.


BoJ kept policy unchanged overnight although did raise CPI and growth forecast from its previous thinking in October. I believe this is the first time for a number of years that BoJ have really moved away from the notion that risks to inflation are on the downside. The move to something more balanced was pretty much as expected, JPY has not gained ground, maybe the change of wording was not quite enough for some who thought BoJ would be more hawkish. EURJPY now 130.85, pretty much where it was pre-announcement.


UK unemployment numbers this morning continue to show some tightness in the labour market. The unemployment rate moved down to 4.1% while the previous months claimant count change saw a decent revision. This is likely to solidify expectations for a rate rise in Feb. GBPUSD now 1.3635, it had been up to 1.3650 this morning but a bit of USD strength has capped that move for now. EURGBP at 0.8355 (GBPEUR 1.1970).


Oil prices are climbing, reaching the highest levels since 2014. Brent briefly traded above $88.00, while WTI moved above $85.50. Both are a little off those highs as I type but Goldmans are forecasting Brent to push to $96 this year and up to $105 next year. Goldmans have been wrong before of course, but its generally worth knowing what they are thinking.


Russia have moved staff from embassies in Ukraine, which could be anything from a precursor to an invasion, to a simple bit of propaganda. To make matters worse, Belarus has said it will soon hold joint military exercises with Russia near the Ukraine border, not exactly helping to de-escalate the situation unless of course it allows Russia to eventually say ‘troops were moved as part of this drill and now its over we are moving them back, don’t know what all the fuss was about’. A bit of face-saving perhaps, or is that too wishful thinking. Anyway, Germany is looking to hold talks with France, Russia and Ukraine to see if they can get a resolution.


Two years ago the US and China signed their phase one trade deal. The deal came just a few days before Covid reared its head which has certainly made it difficult for China to keep to its side of the deal, although to my knowledge there has been little in the way of significant tariff increases or decreases in this time. I doubt it has panned out as either side expected, but we’ve heard very little of a phase 2 trade deal since then, not a great surprise given the pandemic.


I am out of the office for a day so there will be no report tomorrow morning. I’ve added in a calendar for Wednesday, it’s certainly looks a bit more interesting than todays meagre offerings.



- 10.00 German ZEW

- 13.15 CAD housing starts

- 21.45 NZ electronic card retail sales


- Wednesday

- 07.00 UK CPI, RPI, PPI

- 07.00 German CPI, HICP

- 09.00 EU current account

- 13.30 US building permits, housing starts

- 13.30 CAD CPI

- 14.15 BoEs Bailey speaks

- 23.30 AUS Westpac consumer confidence

- 23.50 Japan trade balance

- 00.00 AUS consumer inflation expectations

- 00.01 UK RICS house prices

- 00.30 AUS unemployment

- 01.30 PBoC rate announcement


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