LONDON: Arbuthnot Latham, the historic British bank founded in 1833, released its latest Treasury Market Commentary on June 13, 2025, highlighting critical developments in global and domestic economies. The report covers rising UK unemployment, wage growth, central bank rate expectations, and geopolitical trade dynamics. Below is a detailed breakdown of the findings.
UK Economic Indicators Show Mixed Signals
The report underscores two pivotal UK metrics:
| Indicator | Value | Trend |
| Average Weekly Earnings (3M/YoY) | 5.3% | Steady growth, though inflationary pressures persist |
| Unemployment Rate | 4.6% | Highest in 4 years, signaling labor market softening |
Key Context:
- Wage Growth: At 5.3%, earnings growth remains elevated, complicating the Bank of England’s (BoE) inflation fight.
- Unemployment: The 4.6% jobless rate—a four-year high—suggests economic cooling, reinforcing expectations of rate cuts.
Central Bank Policy Shifts: Rate Cuts Loom
UK: Markets now price in two BoE rate cuts for 2025, likely in August and November, as growth slows.
US: With inflation “slightly weaker,” the Federal Reserve is expected to hold rates until September, diverging from earlier projections of a July cut.
Eurozone: The euro strengthens as the European Central Bank (ECB) signals a narrowing rate gap with the Fed, bolstered by its growing reserve currency status.
Geopolitical and Currency Developments
1. US-China Trade Talks: Cautious optimism surrounds negotiations, though tariffs and tech restrictions remain sticking points.
2. GBP/USD Dynamics: Sterling holds near recent highs amid a persistent “anti-USD” theme, driven by softer US economic data.
Tables: Comparative Central Bank Outlook
| Central Bank | Current Rate | Next Expected Move | Timing | Driver |
| Bank of England | 5.25% | Cut | August 2025 | Rising unemployment |
| Federal Reserve | 5.50% | Hold, then cut | September 2025 | Subdued inflation |
| European Central Bank | 3.75% | Hold | — | Euro reserve demand |
Key Takeaways
- Labor Market Warning: UK unemployment at a four-year high may force the BoE to pivot.
- Global Divergence: The Fed delays cuts while the BoE and ECB chart separate paths.
- Currency Wars: The euro and GBP capitalize on USD weakness, with trade tensions simmering.