British economy continues to weaken, trade unions strike talks

[The UK consumption situation is difficult, but the level of unemployment still supports the economy]

Due to various economic headwinds, the UK consumer environment is expected to be difficult in the first half of 2023. However, the UK job market will continue to support the economy, with the job market expected to remain resilient throughout the year, with an unemployment rate of 4.5%-5%, and a proposed hike in the UK minimum wage of almost 10% in 2023 may be enough to keep real wages in the second half of the year. to grow effectively. With demand for goods and services not expected to start improving until the fourth quarter of this year, companies with solid balance sheets, strong management and a strong sense of purpose are more likely to outperform the market.

[EU officials predict that Europe's energy supply will be seriously insufficient in 2023]

Valdis Dombrovskis, executive vice president of the European Commission in charge of economic affairs, emphasized in an interview with the media that the EU's energy supply may be seriously insufficient in 2023. Although a lot of work has been done during 2022, this cannot ensure sufficient energy supply in 2023. Additional natural gas supplies must be found and supporting infrastructure must be built, otherwise the next winter will be very difficult. Keep causing problems.

【ECB tightening policy becomes the focus, the euro may rise in early 2023】

The euro could rise in early 2023 on positive risk appetite, lower energy prices and a possible de-escalation of the Russia-Ukraine conflict, which will focus more on the ECB's policy tightening. The Fed's forecasts show U.S. inflation falling at a much faster pace than the ECB's forecasts for euro zone inflation. The European Central Bank is therefore expected to raise interest rates sharply, and its rate hike cycle may last longer than the Fed. Even though January seasonality points to a slow start for EUR/USD, it is expected to pick up speed as we head into spring.

【UK credit data shows further weakness in the housing market】

UK data on consumer lending for November showed that rising interest rates are weighing on economic activity, particularly the housing market. Mortgage approvals fell to 46,075 in November, the lowest level since June 2020, after the UK's mini-budget crisis caused mortgage rates to spike in October. However, rising interest rates did not affect consumer credit, which more than doubled in November from the previous month, possibly as households turned to consumer credit to offset high living costs. The cumulative downside effect of higher interest rates has only just begun to build and will see further rate hikes in the coming months.

[The British healthcare system is sounding the alarm]

Surveillance data show that the "highly contagious" new crown variant XBB.1.5 has appeared in the UK, and 1 out of every 25 new crown cases in the UK has been infected with this strain. The high transmissibility of the XBB.1.5 strain may trigger a new round of infections, sounding the alarm for the British medical service system. In the week ending 17 December 2022, 4% of cases in the UK were caused by the XBB.1.5 strain. Relevant studies have shown that the XBB strain is highly transmissible and has strong immune escape capabilities. The spread of the strain will exacerbate the crisis facing the UK's National Health Service system. Under the blow of the "dual epidemic" of the new crown epidemic and influenza, the British medical system will be under tremendous pressure.

【UK Mortgage Approvals Fall to Lowest Level Since the Epidemic Begins】

UK mortgage approvals fell to their lowest level since the start of the pandemic after soaring borrowing costs dampened demand for home purchases. The Bank of England has raised interest rates nine times in the past year to curb inflation. That has pushed mortgage rates from 1% to closer to around 6%. Separate data from the Bank of England showed that British household finances are increasingly strained. Savings fell for a second month in a row while credit card debt rose, suggesting British households are struggling to cope with rising cost of living pressures.

【Hoping to have a reasonable negotiation with the union】

British Prime Minister Sunak: I know there are challenges in the health emergency services industry. We attach great importance to public sector workers and the nursing profession. We hope to have reasonable negotiations with unions. We will reduce the inflation rate this year. Half, to reduce the cost of living, in the next few days we will update the next steps of the government, we will grow the economy, create better jobs, the NHS waiting list will be reduced, people will get treatment faster.