Euro: French Debt Is the Pressure Point

Political turmoil in Europe, and France in particular, is continuing to trouble traders, Reuters reported on Monday. France’s 10-year bond yield approached 5% this month, hitting its highest level since 2002. As of the end of the second quarter, public debt was 119% of France’s GDP. The ECB and euro zone finance ministers have urged France to pass its budget for 2027 in a bid to calm bond markets. Because France is going through an excessive deficit procedure, it is not eligible for the ECB’s tools to stabilize financial markets.

Pound: Jobs Data Back the Hike Case

According to data released this morning by the Office for National Statistics, UK unemployment for the period between June and August was 4.7%. That is the lowest it has been in a year. While payroll employees did increase, by about 13,000 in September, they are still down about 66,000 on the year. There were other weaker indicators. Vacancies dropped to 691,000, the lowest since 2021, during the pandemic, and total pay growth for the same period slowed to 3.7% from 3.9%. With pay still growing faster than inflation, real wages are still rising, which should support the case for a November rate hike. Wednesday’s CPI should show if inflation has kept increasing.