By Kian Songra
Monday was a quiet day, with little data for the markets to digest, as participants were eagerly anticipating a big week ahead on the data front. On Tuesday, the Pound slid sharply after the UK employment figures revealed a pronounced cooling in the labour market, with a payroll drop of 109,000 in May. This is the steepest fall since May 2020 during the Covid crisis and a continued decline in vacancies (‑63,000), pushing the unemployment-to‑vacancy ratio up to 2.2 and signalling softer wage growth. Unemployment figures also increased from 4.5% to 4.6%. Economists point to rising employer costs, from national insurance and minimum wage hikes to tariffs and regulatory pressures, as key drivers behind job cuts.
Consequently, Sterling weakened against both the Euro and Dollar, as markets ramped up expectations of two further Bank of England rate cuts this year, with pricing now implying about 35–50 bps of easing ahead. To contrast, recent comments from the European Central Bank, is that they may be nearing the end of their monetary easing cycle, as inflation has come under control, possibly leading to a stronger Euro moving forward.
Looking ahead, today’s release of US Consumer Price Index (CPI) inflation for May will be a key data release, potentially reshaping expectations around the Federal Reserve’s rate path. A greater than expected reading, could dampen hopes for a near-term rate cut, strengthening the USD, while a soft reading may revive dovish bets, shaping direction in the USD and, by extension, the GBP/USD pair.
Crucially, today the UK Chancellor Rachel Reeves will deliver her spending review later, setting out the budgets for all government departments over the next few years. Today’s review is not a budget, so don’t expect announcements on tax changes. But we will get an idea of how much the government has to spend. Reeves is due in the House of Commons at 12:30 BST, just after the weekly session of Prime Minister’s questions. This announcement will be eagerly anticipated by the markets, for any insight or comments that may signal a glimpse into how this may shape key policies like growth.
Reeves’s spending review offers a structured, pro‑growth narrative backed by fiscal caution; a combination that could gently bolster Sterling by reassuring markets. But the limited fiscal flexibility, reliance on tax or spending adjustments, and uncertainty over future growth could leave Sterling vulnerable to volatility, particularly if upcoming fiscal announcements disappoint.
On Thursday, UK economic health will be in focus with the release of monthly GDP and industrial production figures. The GDP figure is forecast to come in at ‑0.1%, a reading that would reinforce concerns about stagnation in the UK economy and potentially weigh further on Sterling, especially in the wake of this week’s soft labour market data. Across the Atlantic, US Producer Price Index (PPI) inflation and weekly jobless claims will offer further insight into cost pressures and labour market resilience.
Friday rounds off the week with the University of Michigan’s US inflation expectations and the UK’s inflation attitudes survey. Both releases are key sentiment gauges that could influence central bank outlooks. In Europe the German inflation reading will be released, as well as the EU industrial production and trade balance.
Meanwhile, markets will remain alert to trade policy updates and geopolitical tensions, particularly developments in the Russia-Ukraine conflict, which continue to influence global risk appetite. Additionally, the Federal Reserve enters its pre-meeting communications blackout on Saturday, limiting official commentary ahead of the June 17–18 FOMC meeting.
With a busy week remaining, those with upcoming currency requirements should look to get in touch with your currency consultant to remove the exposure to the market and discuss your options to help navigate you through the currency markets. With global market uncertainty and ongoing geopolitical issues, it could be worth looking at fixing rates in advance on a Forward Contract. This helps create peace of mind by fixing the cost of your property ahead of time, to avoid it becoming thousands of Pounds more expensive.