12 January 2026: JLR activity returns to normal

Economists believe the UK economy returned to growth in November, as car production recovered following the cyberattack on Jaguar Land Rover.

Monthly GDP is expected to have risen by 0.2% in November when the Office for National Statistics unveils its newest figures later this week. It would represent a timely boost for the Labour government after declines of 0.1% in both September and October, and mark the first increase since June.

Economic activity over the previous two months was hit by weaker production, particularly in the car manufacturing sector, after the UK’s largest carmaker, Jaguar Land Rover, halted production in September due to a significant cyberattack.

The ONS also highlighted that some business spending was subdued ahead of the budget, which took place on November 26. The economy continued to chug along in November, despite months of pre-budget uncertainty. Services activity likely rose at a solid rate in November, driven by healthy growth in consumer-facing services.”

November’s data is expected to show some uplift in consumer spending ahead of Christmas, despite concerns over the budget. Hospitality spending could help drive growth in the services sector. Spending data in this sector indicated 3.1% growth in November, up slightly from 3% in the previous month, amid resilient spending in parts of the industry such as pubs and a slight lift from inflation.

Nevertheless, monthly retail data from the ONS showed that retail sales volumes dipped by 0.1% in November.

Experts have pointed to stronger growth for the month, despite caution in the run-up to the autumn budget at the end of the month.

The ONS also highlighted that some business spending was subdued ahead of the budget, which took place on November 26.

The fresh ONS data will shed more light on how confident businesses and consumers were about their spending and investment during the month, amid concerns about potential tax changes to the budget.

Thursday’s data is likely to see the most significant improvement in manufacturing.

Manufacturing bounced back during the month as car production returned to more normal levels.

Last month, the Society of Motor Manufacturers and Traders reported that production jumped 22% month-on-month in November, with vehicle manufacturing up 12%.

This improvement is also likely to support growth over the final quarter of 2025, this is still likely to be 0.1% growth for the period.

Recruiter data showed fewer placements and lower vacancies, while faster starting-salary growth and cost strains could shape the Bank of England’s next rate-cut call.

The latest REC–KPMG survey showed the 39th straight month of weaker hiring, and the slide was the sharpest in four months as employers stayed cautious amid higher costs. Businesses again cited a payroll tax increase in the 2024 budget as a reason to hold back.

Even so, the slowdown isn’t a free fall: permanent placements eased to 44.3 from 45.5, and temp billings dipped to 47.6 from 48.8, while starting salaries for permanent roles rose at the fastest pace since May as firms competed for scarce skills.

For the Bank of England, that mix matters: more incredible demand helps bring inflation down, but stubborn wage pressure can keep services inflation sticky, complicating the path after December’s rate cut.

The pound saw increased volatility as markets were driven primarily by Donald Trump's expansive foreign policy moves. It fell to a low of 1.3392 and closed at 1.3407.

The US economy added just 50,000 jobs in December, according to the latest monthly report from the Bureau of Labour Statistics. The unemployment rate ticked down to 4.4% from a revised 4.5%. The latest data means 2025 saw the weakest annual job growth since 2003, with just 584,000 jobs added last year.

Analysts expected an addition of 73,000 payrolls during the month, according to Dow Jones data. This comes after a higher-than-expected 56,000-job increase in November, revised downward from the previously reported 64,000.

The jobs report comes nearly three weeks ahead of the FOMC’s next meeting, which is scheduled for January 27 and 28. According to data from the CME FedWatch tool, the probability of the Fed keeping rates unchanged has increased to 97.2%, compared to 88.9% a day ago.

In terms of the monetary policy, this latest job report is likely to reinforce Jerome Powell’s view that the Federal Reserve is well-positioned, giving the Central Bank time to wait before cutting rates again.

2025 marked the fewest job gains since 2020. On average, employers create about 49,000 jobs per month. That’s a significant drop from the 2 million jobs added over 2024, or about 168,000 per month.

Federal Reserve Chair Jerome Powell revealed last night that the Justice Department served the Central Bank with grand jury subpoenas, threatening a criminal indictment related to Powell’s testimony before the US Senate.

Powell suggested the action isn’t so much about his testimony as it is about a difference of opinion on interest rates. In a statement, he stressed what he called “unprecedented action” in the broader context of the administration's threats and ongoing pressure.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said in a recorded video.

“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation.”

Powell defended his record, noting that he has served at the Fed under both Democrats and Republicans and has always based his decisions solely on the Central Bank's dual goals of maximum employment and stable prices, as charged by Congress.

The Justice Department's subpoenas mark a significant escalation in the yearlong struggle between the administration and the Fed.

It is also the first time Powell has commented directly on the feud between him and Trump since the President's return to office.

Financial markets are increasingly pricing former Federal Reserve Governor Kevin Warsh as the likely nominee for the next chairman of the U.S. Federal Reserve, following Donald Trump’s earlier assertion that he had appointed an ideal candidate to succeed the current Fed chair, but did not disclose the individual’s identity.

This news came as the market cut the odds, making Warsh the leading candidate to succeed Powell, followed by Kevin Hassett, who currently serves as Director of the United States National Economic Council. On the other hand, Christopher Waller and Rick Rieder remain further down the list.

Trump later signalled that he might consider interviewing Rieder for the role, inviting him to the White House for an interview. The move increased Rieder’s visibility in the selection process and added another layer of uncertainty to the race.

Trump's motive behind his removal of the Venezuelan President last week saw the dollar index rally to a high of 99.26 and close at 99.14. Trump is attempting to protect the U.S. from oil price volatility by giving U.S. oil firms a greater say in global production.

The situation in Iran and Trump’s envious glances towards Greenland will likely keep the dollar firm for this and probably next week.

European Central Bank Chief Economist Philip Lane said he expects the euro to play a bigger role in investors’ portfolios as US President Donald Trump’s economic policies lead them to rethink their dollar holdings. However, the dollar index is not yet reflecting this view.

A more “domestically oriented” US economy suggests that the greenback will offer less of a hedge against global risk, Lane said in a speech on Friday. That should lead to a bigger “home bias” for European investors, and global market participants might choose the euro as the “next best” international currency, he said.

A “domestic orientation” does not yet appear to be on Trump’s agenda, given his actions in Latin America in general and Venezuela in particular, coupled with his likely action in “stirring up” demonstrations in Iran and his envious glances towards Greenland.

“While the dollar should remain by far the largest international currency, there is some scope for a shift toward a less unipolar international monetary system,” Lane said at an event in Kolding, Denmark.

The ECB has been trying to improve the Euro’s global standing amid Trump’s shift toward protectionism and attempts to undermine the Federal Reserve's independence. Bank of France chief Francois Villeroy de Galhau also said this week that such actions have damaged confidence in the greenback and will likely fuel a trend toward greater diversification.

Reaching that goal could mean lower borrowing costs and protection from currency fluctuations and sanctions, ECB President Christine Lagarde has said, urging governments to make the euro more attractive.

Resilience has become a popular image in the Eurozone as the ECB continues to tighten monetary policy to bring inflation down. Still, it could now be shifting focus to promoting growth.

This resilience could be seen in the data released last week, as the ECB wrapped up 2025 and began to look ahead.

Retail sales rose more than expected in November, and German industry continued to expand, offering further evidence that the currency bloc ended a turbulent year with stable, if modest, growth, according to a string of data released on Friday.

The Eurozone economy grew more quickly than most forecasts in 2025, indicating that firms and consumers are adjusting well to shocks such as the upending of global trade. Still, resilience has not yet translated into a boom, and most expect only modest expansion this year.

"The main takeaway from the data released over the past few days is that the Eurozone economy remains subdued, with inflation in a sweet spot at around 2%," Oxford Economics said in a note to clients.

This would satisfy the European Central Bank, which has supported the economy over the past two years with a steady stream of rate cuts, but is unlikely to do more.

Retail sales rose 0.2% in November, just ahead of expectations for 0.1%. Still, a growth rate of 2.3% compared to the previous year was well ahead of forecasts of 1.6%, due to a significant upward revision to October figures. In Germany, the bloc's biggest economy, which has skirted a recession for three years now, growth was below average, but Spain continued to boom, and France was also well above trend.

Despite several ECB officials “talking the Euro up,” it has started 2026 in the shadow of a dollar, which, while not “tearing up trees,” is back on its way to back above the 100 level, which appears to be the market’s watershed level for considering the Greenback to be strengthening or weakening.

The common currency fell to a low of 1.1618 last week and closed at 1.1634.

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