Garton Global | Monthly Market Digest
Sterling closed December on firmer footing as a Bank of England rate cut coincided with cooling inflation, though rising unemployment capped enthusiasm. In Japan, bond markets were jolted by renewed tightening signals from the BoJ, reviving global carry-trade nerves, while the euro stayed trapped between fading Ukraine peace hopes and political friction over funding Kyiv. Looking into January, attention turns to US labour data and oil markets, where softer payrolls could weaken the dollar and crude prices remain finely balanced amid Venezuela tensions.
Check your positioning and speak to the Garton Global team today.
LAST MONTH: DECEMBER
🇬🇧 BoE rate cut supports GBP as inflation cools and jobs weaken
● Sterling held firm into mid-December as markets priced a quarter-point Bank of England rate cut, with GBP/USD trading above 1.33 on softer US dollar dynamics.
● UK inflation fell to 3.2%, strengthening the case for easing, while unemployment rose to 5.1%, its highest since 2021.
● The pound’s resilience reflected relative policy clarity, though further labour market deterioration keeps upside capped.
🇯🇵 BoJ signals rate rise, shaking bonds and carry trades
● Japanese yields jumped as the Bank of Japan signalled a likely rate increase, with two-year yields moving above 1% for the first time since 2008.
● The yen strengthened briefly before fading, highlighting scepticism that tightening alone can reverse structural weakness.
● Global markets reacted nervously, with bond sell-offs reviving concerns over yen carry trade unwinds and spillovers into risk assets.
🇪🇺🇺🇦 Ukraine peace hopes fade as talks stall
● The euro remained range-bound as Russia rejected revised peace proposals, keeping geopolitical risk firmly in play.
● EU efforts to fund Ukraine via frozen Russian assets hit resistance, adding political and legal uncertainty.
● Markets continue to price the euro as binary: upside on credible peace progress, downside if talks collapse or tensions escalate.
THIS MONTH: JANUARY
🇺🇸 US jobs data to shape dollar, Fed expectations
● Markets are pricing Friday’s non-farm payrolls as key, with consensus forecasts at 50k–75k jobs added, underscoring a clearly softening labour market.
● A weaker than trend report would bolster expectations for more Federal Reserve rate cuts and weigh on the dollar.
● A stronger outcome could temper easing bets and support USD sentiment into early 2026.
🛢️ Oil prices range-bound despite Venezuela tensions
● Oil prices have remained broadly steady near current levels as abundant global supply offsets geopolitical risk from the US-Venezuela standoff.
● The dramatic capture of Venezuela’s president has so far failed to trigger meaningful supply disruption, keeping crude’s geopolitical premium muted.
● Forward oil direction will depend on whether tensions escalate into wider supply constraints or the market stays focused on the ongoing surplus
Have a great month,
The Garton Team.