FX.co ★ UK 10-Year Gilt Yield Drops to One-Month Low

UK 10-year gilt yields fell below 4.4%, their lowest level since January 14, after fresh data pointed to a further cooling in the labor market and strengthened the case for Bank of England interest rate cuts. Figures from the Office for National Statistics showed that average weekly earnings, including bonuses, rose 4.2% in the three months to December — the weakest pace since the three months to August 2024 and below the 4.6% increase expected by markets. Regular pay, excluding bonuses, also grew by 4.2%, in line with forecasts. Meanwhile, the unemployment rate inched up to 5.2%, its highest level since early 2021 and slightly above economists’ expectations of 5.1%, suggesting a gradual loss of momentum in the jobs market. Attention now turns to Wednesday’s inflation release. Headline inflation is projected to slow to 3.0% in January, the lowest reading since March 2025, while core inflation is expected to ease to 3.1%, its lowest level in more than four years.