Jobs Data Underlines UK Fragility And Bankman-Fried Arrest Sends Jitters Through Crypto World

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Bitcoin and interest rate correlation Sam Bankman-Fried
  • UK unemployment edges up to 3.7% and vacancies rise, underlining fragility of the UK economy.
  • The inactivity rate also fell slightly by 0.2% to 21.5%.
  • Hopes that US inflation is easing sparked rally on Wall Street and gains in Asia.
  • Arrest of FTX founder Sam Bankman-Fried sends fresh shivers through the crypto world.
  • Bitcoin on a fresh volatile ride, trading around $17,170.

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UK’s Fragile Economy

The increasing fragility of the UK economy is showing up in the labour market with unemployment edging up as uncertainty about the future takes hold. Companies are clearly nervous about the incoming recession and are starting to batten down the hatches as the storm brews.

On the face of it, the jobless rate has registered a small, expected uptick rising to 3.7% from 3.6% last month, but there is added weakness is showing up in the decline in the number of job vacancies.

They fell by 65 thousand, the fifth consecutive monthly decline as firms fearful of the bumpy road ahead have become more cautious about taking on too many staff. More people are leaving the inactive masses, clearly keen to earn extra money as the cost-of-living crisis intensifies but the overall rate remains stubbornly high.

With the fight for talent easing a little though, it’s welcome news on the inflation front as this may start to dampen down wage demand spiral, which the Bank of England fears could become embedded in the economy.

But with the UK still in the grip of strikes, and the clamour for higher pay still so being heard so loud, this will take time to filter through. It’s still forecast that Bank of England policymakers will vote for a rate rise of 0.5% when they meet on Thursday.

Expectations that inflation is on the way down in the United States, the world’s largest economy has helped stocks lift in Asia after a relief rally on Wall Street. US Consumer inflation expectations for the next year have fallen back and that has helped a more positive sentiment to spread amid hopes it will mean the Federal Reserve won’t have to be so tough in terms of steep interest rate rises, with a crunch decision due tomorrow.

The official CPI inflation print is due out as trading gets underway on US indices, so there is likely to be an element of caution as indices open in Europe.

Sam Bankman-Fried Arrested

The arrest of Sam Bankman-Fried on securities fraud charges is another twist in the very sorry tale of the cryptocurrency exchange FTX. His rise to power and riches and dramatic fall from grace, epitomises the dangerous rollercoaster ride of the crypto wild west, where so many schemes have crashed and burned.

His company spent huge sums, advertising its ‘credibility’ and up to a million people put cash into the exchange. Now many fear they will not get their life savings back, and its 50 largest creditors are thought to be owed almost $3.1 billion. The implosion of FTX sent shockwaves through the crypto world – and Bankman Fried’s arrest sent Bitcoin back on another volatile ride.

The scandal has reinvigorated lawmakers and regulators determination to regulate crypto, not just in the US but around the world. They will be walking a tricky tightrope. It’s clear that much better safeguards need to be in place to ensure consumers are more protected from another FTX style implosion, but at the same time regulators also don’t want to quash innovation in the digital coin and blockchain space.

The challenge will be incubating, without giving too much legitimacy to an industry where fraud is rife and the intrinsic value of coins and tokens is sorely lacking. With the European Central Bank warning that Bitcoin is in its last gasp, there is a danger that other jurisdictions could be seen as a safe haven for illegal money if their arms open too wide to welcome the crypto industry.’’

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown