UK FISCAL: Minimum wage increase in line with expectations (and sugar tax)
Nov-26 08:05
- The National Living Wage (which applies to those aged 21+) was confirmed by the government last night at 18:00GMT and was fully in line with expectations. It will rise from GBP12.21 per hour to GBP12.71 (a 4.1% increase) from April 2026. Note that the April 2025 increase was 6.7% - so this is a notable slowdown but still relatively high. The August update from the Low Pay Commission had stated that the increase to GBP12.71 was its "central estimate" and that it would likely be in a GBP12.55 to GBP12.86 range.
- The minimum wages for 18-20 year olds will increase by 8.5% to GBP10.85 as part of the government's objective to bring 18+ year olds into the "adult" National Living Wage. This is just over half of the increase seen in April 2025, which saw a huge 16.3% increase. It will be seen as another disincentive for employers to hire young people. The minimum wage for those aged 16-17 will increase 8% to GBP8.00.
- We think that the wage increases are close enough to expectations to not have had any impact on either MPC members, the probability of cuts or market views.
- Yesterday also saw reports that the sugar tax would be extended to pre-packaged milk-based drinks (milkshakes, lattees etc) but would not apply to drinks prepared in cafes or coffee shops. The existing threshold for the sugar tax will reduce from 5g/100ml to 4.5g/100ml but there will be a "lactose allowance" for naturally occurring sugars in milk. There may be some very, very marginal increases in prices - but manufacturers are more likely to reduce sugar if they are currently close to the 5g threshold. And this is a very, very small part of the inflation basket.
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EGBS: Core Bonds Pressured on Trade Deal Hopes; Belgian, US Supply Due This Week
Oct-27 08:04
- Bund futures gapped lower at the resumption of trade late Sunday as the growing hope of a trade deal between the US and China helped support equities and pressure core global bonds. President Trump said that nothing was agreed yet but felt "good" on the prospect of a deal.
- The opening gap in Bunds sits at 129.49, while the initial support remains at 129.13. European CPIs will be the main data release this Week, but focus will be on the Fed meeting on Wednesday outside of Europe.
- Investors will also be watching a busy week of earnings on Wednesday & Thursday. Microsoft, Alphabet, Meta, Amazon and Apple are all due to report.
- Month End extensions will likely be small for Europe, average for the US and large for the UK into Friday.
- SUPPLY: Belgium 5s, 7s, 10s, US Sells $69bn of 2yr Notes and $70bn of 5yr Notes.
- The Fed and ECB are inside their pre-meeting media blackout periods, keeping the speaker schedule muted.
EURJPY TECHS: Pierces Key Resistance
Oct-27 08:03
- RES 4: 180.75 Top of a bull channel drawn from the Feb 28 low
- RES 3: 180.00 Psychological round number
- RES 2: 178.94 1.236 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 1: 178.15 Intraday high
- PRICE: 177.83 @ 08:02 GMT Oct 27
- SUP 1: 175.80 20-day EMA
- SUP 2: 174.82/27 Low Oct 17 / 50-day EMA
- SUP 3: 173.92 Low Oct 6 and a gap high on the daily chart
- SUP 4: 173.24 High Oct 3 and a gap low on the daily chart
The trend structure in EURJPY is unchanged, it remains bullish and the latest recovery reinforces bullish conditions. The cross has pierced key resistance and the bull trigger at 177.94, the Oct 10 high. A clear break of this hurdle would confirm a resumption of the uptrend and open 178.94, a Fibonacci projection. First key support to watch lies at 175.80, the 20-day EMA. Support at the 50-day EMA is at 174.27.
STIR: EUR STIR Markets Positioning For a Neutral Tone From Lagarde On Thurs
Oct-27 08:00
- ECB-dated OIS now price just 12bps of easing through September 2026, down from almost 20bps at the start of last week. Following the stronger-than-expected October flash PMIs last Friday, markets appear to be positioning for a neutral tone from President Lagarde at Thursday’s ECB decision. The 1y1y ESTR forward rate is now back at 1.89%, after closing at 1.81% on October 17 (see chart).
- The ECB is firmly expected to hold to deposit rate at 2.00% on Thursday, with a data-dependent and meeting-by-meeting approach set to be re-iterated. Lagarde will likely stress that policy is in a “good place” once again.
- That said, the MNI Policy Team’s latest sources piece noted that while policymakers are happy with current rates, they are leaving the door open to an additional cut, given inflation and growth risks seen as broadly balanced but still tilted to the downside.
- The ECB decision comes alongside a heavy regional data calendar, which will help inform these risks. Q3 flash GDP (Thurs), October flash inflation (Fri) and the Q3 Bank Lending Survey (Tue) are all due this week.
- Compared to Friday’s settlement levels, Euribor futures are -0.5 to -1.5 ticks through the blues. Global rates markets are weaker this morning amid hopes of a US/China trade deal.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Oct-25 | 1.928 | 0.0 |
| Dec-25 | 1.919 | -0.9 |
| Feb-26 | 1.904 | -2.4 |
| Mar-26 | 1.859 | -6.9 |
| Apr-26 | 1.850 | -7.9 |
| Jun-26 | 1.818 | -11.0 |
| Jul-26 | 1.815 | -11.3 |
| Sep-26 | 1.809 | -11.9 |
| Source: MNI/Bloomberg Finance L.P. | ||
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Rachel Reeves
