UK 10-year gilt yields held below 4.5%, their lowest level since January 22, as markets absorbed stronger-than-expected US labor data alongside easing political risk in Britain. US nonfarm payrolls rose by 130,000 in January, the largest gain in over a year, while the unemployment rate unexpectedly slipped to 4.3%. The figures prompted investors to scale back expectations of near-term Federal Reserve rate cuts, with a first move now fully priced in for July instead of June and the probability of a March cut falling below 5%.
In the UK, Prime Minister Keir Starmer secured support from cabinet colleagues and the wider Labour Party after his chief of staff, Morgan McSweeney, resigned in connection with the Lord Peter Mandelson scandal, helping to calm domestic political jitters. At the same time, markets continued to anticipate further monetary policy easing from the Bank of England. Although the BoE left its benchmark rate unchanged at 3.75% in a split decision, policymakers adopted a more dovish tone, signaling that inflation is expected to begin moving back toward the 2% target from April.
