UK FISCAL: Latest Reports Suggest Reeves Will Not Lower Income Tax Thresholds

Labour market data from the public employment service (PES) pointed to stabilising developments in September. The Riksbank expects labour market conditions to improve from the start of 2026, so a stabilisation in Q3/Q4 is a necessary first step. LFS unemployment data is due on Friday, with the median analyst expecting an 8.7% unemployment rate (vs 8.8% prior). 

• The PES unemployment claims rate eased for the second consecutive month to 6.95% in September (vs 7.06% in August, 7.10% in June and July).
• The stock of vacancies and vacancy growth may have started to bottom out. In September, there were 87k vacancies, up from 81.5k in August for the highest since February. On an annual basis, vacancy growth remains negative a -6% Y/Y, but this is still above August’s -14% and July’s -22%.
• The 3mma of redundancy notices fell to 4,775, down from 4,922 in August for the lowest in over two years. 

• In the FI space, a bull cycle in Bund futures remains intact. This week’s gains have resulted in a breach of resistance at 129.44, the Sep 10 high and a key short-term resistance, strengthening a bullish condition and signalling scope for a continuation higher. Sights are on 130.05 next, a 76.4% retracement of the Jun 13 - Sep 3 bear leg. Note that moving average studies have crossed into a bull-mode position, a bullish signal. First important support is 128.71, the 50-day EMA. Initial support lies at 129.13, the Oct 10 low.
• A bull cycle in Gilt futures remains intact following recent strong impulsive gains. Today’s extension higher from the open strengthens current conditions. The contract has recently cleared key resistance at 91.82, the Sep 24 high. The breach opens 92.72 next, a 1.000 projection of the Sep 3 - 11 - 26 price swing. Initial firm support lies at 90.90, the 20-day EMA.

The same large outright Call in Euribor is now sold:

• ERZ5 98.25c, sold at 0.5 in 10k.

Earlier:

• ERZ5 98.25c, bought for half in 33k.