Market Watch: Bailey Raises Concerns on Employment and Growth

Key Insights:

• Bank of England Split: The Bank of England's Monetary Policy Committee isn't unanimous in its approach, with a significant split emerging. A key point of contention is whether to proceed with a rate cut, a move that board member Greene has argued against, preferring to keep rates steady for now.
• U.S. Jobs in Focus: The economic spotlight today shifts to the U.S., where the latest figures for weekly jobless claims are being released. This data is a crucial indicator of the labour market's health and will likely influence market sentiment and future policy decisions.

Market Recap:

UK: A Divided Bank of England

The Bank of England's policy direction is now a topic of open debate. Governor Andrew Bailey commented on the need for continued rate cuts but with a note of caution regarding a weakening job market. His remarks were quickly followed by comments from policymaker Megane Greene, who suggested a pause in November to avoid a potential policy U-turn if inflation remains high. This uncertainty put pressure on the British pound, which lost ground against both the US dollar and the euro, trading near its recent and yearly lows, respectively.

US: The Fed's Conflicting Views

Similarly, the U.S. Federal Reserve is not of one mind on its future actions. Mary Daly argued that more rate cuts are necessary to support the economy, while Austan Goolsbee countered that he would be hesitant to cut further given that inflation is heading "the wrong way." This split perspective provided a tailwind for the U.S. dollar, which saw its index rise by 0.8%.

Today's Market Watch:

U.S. Data to Drive the Day:

The market is keenly focused on today's scheduled speeches from Federal Reserve officials, as traders search for clarity on the pace and scale of future rate cuts. The key question is whether inflation worries now outweigh employment concerns for policymakers.

Key Data Points:

Later today, we'll see fresh reports on weekly jobless claims, alongside the final numbers for Q2 GDP and Core PCE inflation. These releases will provide vital context for the Fed's policy debate.

Pound Under Pressure:

Meanwhile, the British pound's value against the euro continues to be a point of interest. It's currently testing its 2025 lows, and whether it finds support at this level will be an important indicator for the currency going forward.

25th September 2025

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