10 November 2025: Starmer is expected to take more flak from the Left than the Right on tax rises

Voters are becoming ever more disillusioned by the way the Government is dealing with the economy. Having promised stable economic growth coupled with smashing the gangs, sending people across the Channel and reducing NHS waiting times, Sir Keir Starmer and his Cabinet are failing to convince anyone that their policies will bring the results that were promised.

Cabinet ministers are showing barely credible naivety by blaming the previous Government for the ills that have pervaded the country since they were elected. Hasn't it always been the case that a change of Government always happens due to voter disillusionment with what went before?

Reform UK leader Nigel Farage is now, incredibly, the most trusted politician to handle the British economy, which has continued to falter under the centre-left government of Prime Minister Sir Keir Starmer. A survey of 2,050 UK adults this week found that trust in the Labour Party government’s ability to manage the economy has collapsed.

According to the poll, Prime Minister Starmer and his Chancellor, Rachel Reeves, have become the least trusted major politicians on financial matters, with just 24% and 19%, respectively, putting their faith in the Labour leaders.

Conversely, Reform UK leader Nigel Farage has become the most trusted to steer the British economy, with the survey finding that 34 percent of the public trust him to turn around the nation’s financial situation.

Farage has argued that the British economy has been artificially propped up through government borrowing and mass migration, both of which have managed to increase the bottom-line GDP numbers, but have, in reality, made the lives of the British people more expensive.

Bank of England Chief Economist Huw Pill said not too much should be read into a shift in language in November's Monetary Policy Report, and that the central bank's rate decisions were finely balanced.

Last week, the BoE's main summary of its monetary policy decision no longer included the words "and careful" alongside "gradual" when it said that its Bank Rate "is likely to continue on a gradual downward path".

Asked about this at a briefing for businesses on Friday, Pill said: "I would caution a little against over-interpreting these linguistic changes."

"Perhaps in some circles, 'gradual and careful' had become associated with a certain pace and magnitude of Bank Rate reduction, and I think it's probably fair to say that the committee as a whole never really endorsed that," he added.

Pill was part of the 5-4 majority that voted to keep Bank Rate unchanged at 4% on Thursday. Before Thursday's decision to keep rates on hold, the BoE had cut interest rates every three months since the start of its cutting cycle in August 2024.

Pill said BoE policymakers were divided between one group, who viewed slower business activity and falling employment as likely to push inflation below target over the medium term, and another, which was more concerned that inflation and wage growth had not yet slowed that much despite a weaker economy.

"If you look at the vote, which was a 5-4 vote on this occasion to hold rates, I think that says that the balancing of those to risks is quite finely balanced at the moment," he said.

Financial markets price in a roughly 60% chance of a quarter-point rate cut on December 18 after the BoE's next meeting.

The pound regained a little ground last week after its significant losses in the previous seven days. It reached a high of 1.3174 and closed at 1.3163.

Fog.

It has been shrouding the U.S. economy since the Federal Government was forced into a shutdown by members of the Country’s congress being unable to agree on a budget for the coming year and increase spending to the necessary level.

Two monthly jobs reports have fallen victim to the second-longest US government shutdown, and a key inflation snapshot due in the coming week is also in jeopardy, illustrating a thickening data fog for a Federal Reserve that’s the most divided in recent memory.

The Bureau of Labor Statistics was scheduled to report the October consumer price index on Thursday, yet the government’s closure has not only delayed its release but also halted in-person data collection. It’s increasingly likely the BLS will forgo issuing an October CPI report altogether.

The absence of official reports that inform policymakers about the trajectory of inflation and the job market will prolong a debate about whether another rate cut is needed at the Fed’s December meeting. While Central Bankers had the September CPI in time for their last meeting, they didn’t have an updated jobs report.

The financial markets have mostly considered this a “boy who cried wolf” scenario over the past few years and have never experienced a shutdown of this magnitude or length.

Traders are now asking the questions: “when will it end?” and “what will happen if it lasts after year-end?” and not having any confidence in the answers they are receiving.

Treasury Secretary Scott Bessent said yesterday that there is no formal proposal from the White House to defund the Affordable Care Act and instead send money directly to Americans, despite a social media post from President Trump on Saturday promoting such a plan.

"The President has also come forward with a new proposal overnight, saying it's time, instead, to do away with Obamacare and said to have the money go directly to the people. Do you have a formal proposal to do that?" Bessent was asked, "We don't have a formal proposal," Bessent said, but he added that the Affordable Care Act "has become unaffordable."

In one of his many social media posts, Trump said he was "recommending to Senate Republicans" that money going to insurance companies instead be sent to the American people to buy health care.

The University of Michigan Consumer Sentiment Index, a key indicator of the relative level of current and future economic conditions, has reported a lower-than-expected reading. The index, which is based on a survey of approximately 500 consumers, has posted an actual figure of 50.3.

This figure falls short of the forecasted number of 53.0, reflecting a more pessimistic outlook among consumers than anticipated. The unexpected dip in consumer sentiment could potentially be seen as a negative, or bearish, indicator for the US dollar.

When compared to the previous index figure of 53.6, the current reading shows a decline in consumer sentiment. This downward trend indicates a potential shift in consumer confidence about the economy, which could have implications for spending and investment trends.

The dollar index is finally reacting to concerns over the shutdown. It fell to a low of 99.40 and closed at 99.45 as traders' confidence waned. A break of the 100 level on Tuesday should have driven the dollar into stronger territory, but the lack of any agreement drove a significant level of caution.

The new Governor of the Dutch Central Bank, Olaf Sleijpen, has urged caution on the Dutch Parliament signing off on a proposal for the issuance of Eurobonds. “The risk with Eurobonds is that they ultimately only lead to higher debt,” Sleijpen told the Dutch newspaper De Telegraaf in an interview published this weekend.

While Sleijpen noted that it’s up to politicians “to decide about Eurobonds,” the issue has split parties negotiating a new government after the Oct 29 election. Most right-wing groups oppose the idea, while centrist and left-leaning parties back it, including Democrats' 66, which received the most votes and is now leading coalition negotiations.

In the case that Eurobonds are introduced, Sleijpen stipulated as a strict condition that countries not complying with budgetary rules “should make an extra effort to reduce their debt at the national level”. “As far as I am concerned, total debt ratios must fall, both national and European debt combined,” he added. The Central Banker’s remarks mark a shift from those of his predecessor, Klaas Knot.

After just six months in power, German Chancellor Friedrich Merz’s coalition is facing infighting, policy deadlock and sliding poll ratings, undermining its efforts to take on the rising far right.

It marks a difficult start for the conservative politician, who ran on bold pledges of reviving the stagnant economy, overhauling the threadbare military and toughening immigration policy after years of drift under the previous government.

In German post-war politics, “there has never been such widespread dissatisfaction with a government in such a short period of time,” commented the weekend press.

For Germans who hoped for more decisive leadership after the last government’s collapse, “their expectations have been dashed.

The winners of February’s general election, Merz’s centre-right CDU/CSU bloc, now find themselves neck-and-neck in the polls with the far-right Alternative for Germany, which came second in the poll and is now the largest opposition party.

Merz’s junior coalition partners, the centre-left Social Democrats of ex-chancellor Olaf Scholz, have seen their popularity slide further after a terrible election performance, and now sit around 13-15% in polls.

There have been increasing tensions between the ruling parties in Berlin since Merz failed to be elected chancellor in the first round of voting in parliament in early May, a first in post-war Germany.

In July, they were unable to agree on the appointment of three judges to the constitutional court, with the conservatives considering the Social Democrats’ candidate too left-wing.

A group of young conservative MPs then revolted over a pension reform proposal, which had already been adopted by the cabinet, arguing that it burdened future generations.

Meanwhile, an overhaul of the country’s military service system, which was supposed to demonstrate Germany’s leadership in NATO in the face of the Russian threat, has turned into a stalemate over whether to bring back a limited form of conscription.

Germany is seen to be holding back the nascent optimism that is being felt throughout the region, with voters in other states unable to countenance a strong Union without strong leadership from Germany.

The recent decision to leave rates unchanged should have seen the Euro power ahead, particularly given the fog surrounding the U.S. economy recently. However, reaction in the financial markets has been tepid, with the single current rallying to a high of 1.1591 last week but slipping back to close at 1.1564.

Have a great day!