UK Jobs Data & US Inflation Test Currency Markets.
Summary:
UK Labour Market Verdict (Tuesday): The Office for National Statistics releases December employment data at 07:00 GMT on January 20. Following unemployment's rise to 5.1% in October (the highest since early 2021), markets will scrutinise whether labour market weakness has persisted into year-end.
US Core PCE Showdown (Thursday): The Federal Reserve's preferred inflation gauge arrives on January 22 at 13:30 GMT alongside final Q3 GDP figures. November's core PCE reading will determine whether the Fed's cautious stance on future rate cuts remains justified.
Flash PMI Triple Test (Friday): S&P Global releases preliminary January PMI data for the US, Eurozone, and UK on January 23. These surveys provide the first real-time snapshot of economic momentum at the start of 2026, including critical inflation and employment signals.
This week marks a shift from the holiday lull to full institutional engagement. Currency traders must process a staggered sequence of high-tier releases across three days rather than a single dominant event. The UK labour market report on Tuesday morning sets the tone for Sterling. Thursday afternoon's US inflation data provides a mid-week pivot for the Dollar. Friday's PMI sweep then offers forward-looking validation or contradiction of the recent economic narrative. For those managing FX exposures, volatility windows are distributed throughout the week instead of concentrated in one session.
UK Currency Outlook
Sterling enters the week under pressure from deteriorating employment trends. Tuesday's labour market report for December will reveal whether the sharp rise in unemployment (which reached 5.1% in the three months to October) has continued. Youth unemployment has been particularly concerning, with the 18-24 age group hitting 13.4% in the latest reading. If payrolled employment shows further declines, the Pound will struggle to hold recent levels against both the Euro and Dollar.
Wednesday brings additional pressure with the release of December CPI at 07:00 GMT. UK inflation cooled to 3.2% in November, and a continued slowdown would strengthen the case for accelerated Bank of England rate cuts. For GBP sellers, a soft inflation print would improve exchange rates. Buyers should watch for any upside surprise that might support the currency.
US Dollar Positioning
The Greenback has rallied strongly since late December, with the Dollar Index breaking above 99.00 and holding a consistent uptrend into mid-January. Thursday's release of November core PCE inflation at 13:30 GMT represents the week's critical USD event. The Fed's preferred measure stood at 2.8% in September, and markets are watching for signs that price pressures remain elevated despite earlier optimism about disinflation.
If core PCE comes in above expectations, the Dollar will extend its recent strength, making USD purchases more expensive. The release of final Q3 GDP estimates on the same day provides additional context, though this backward-looking data is unlikely to move markets unless revisions are significant. Friday's flash PMI for January will offer the first indication of whether US economic resilience is carrying into 2026.
Euro Market Drivers
The single currency faces a limited domestic calendar this week. Monday brings final December CPI figures, which are unlikely to surprise given flash estimates have already been digested by the market. The Eurozone's main event arrives Friday morning with flash PMI data for January. Recent surveys have pointed to sluggish growth. Unless the manufacturing and services sectors show unexpected improvement, EUR will remain vulnerable to US Dollar strength.
Tuesday's release of German ZEW sentiment indicators may offer clues about business confidence, but the Euro's trajectory this week will largely be dictated by cross-Atlantic data flow. If US inflation and growth figures on Thursday reinforce the policy divergence narrative, EUR/USD could test recent lows near 1.1585.
Events to Watch This Week:
Monday, January 19: US Market Holiday (Martin Luther King Jr. Day), Eurozone Final CPI (December)
Tuesday, January 20: UK Labour Market Report (December) at 07:00 GMT, Germany ZEW Economic Sentiment (January)
Wednesday, January 21: UK CPI Inflation (December) at 07:00 GMT, US Pending Home Sales (December)
Thursday, January 22: US Core PCE Inflation (November) at 13:30 GMT, US Q3 GDP (Final Estimate) at 13:30 GMT
Friday, January 23: S&P Global Flash PMIs for US, Eurozone, UK (January), Bank of Japan Interest Rate Decision, UK Retail Sales (December)
Transfer Timing Considerations: Sterling holders should note that Tuesday and Wednesday mornings bring two distinct volatility events with the UK employment and inflation releases. For US Dollar transfers, Thursday afternoon's PCE data at 13:30 GMT represents the week's primary volatility window. Friday's PMI releases arrive during Asian trading hours and could trigger price movements in thinner liquidity conditions. Those with flexible timelines may wish to monitor these data points before finalising their currency decisions.
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