Sterling Stumbles: BoE Rate Cut Signals Mount

Sterling halted its four-day rise as UK unemployment increased and wage growth slowed, strengthening anticipation of a BoE rate cut. The 2-year gilt yields fell close to their lowest since August 2024. The BoE is expected to cut rates further amid a struggling labor market and fiscal challenges.

Sterling halted its four-day ascent after data revealed a rise in UK unemployment and a slight slowdown in annual wage growth, reinforcing prospects of a Bank of England interest rate reduction next month.

Yields on the 2-year gilts, which are more sensitive to BoE policy expectations, dipped 6 basis points to 3.74%, nearing their lowest level since August 2024. This followed mixed market reactions, with European stocks climbing to a two-week peak as U.S. stock futures fell after the S&P 500's previous jump.

Despite mixed market signals, the main focus for sterling traders remained the BoE rate outlook. Economist Modupe Adegbembo from Jefferies noted an increase in anticipated rate cuts post-jobs data, alluding to imminent challenges in the UK's labor market and fiscal policy.