FX.co ★ UK 10-Year Gilt Yield Eases after Jobs, Wage Data

The yield on the UK's 10-year government bonds has decreased to 4.65%, as market confidence grows in anticipation of potential interest rate cuts by the Bank of England. This shift comes amid evident signs of an economic downturn. In March, UK businesses reduced their workforce by more than 78,000 jobs — marking the most significant decline since the pandemic — in response to impending increases in payroll taxes and minimum wage demands. The strain on the labor market, alongside disruptive trade policies from the US, has bolstered expectations for imminent rate cuts from the BOE, possibly as soon as next month. Despite wage growth persisting at a notable 5.9%, which complicates monetary decisions, inflation is anticipated to decrease to 2.7% in March before likely ascending again due to scheduled hikes in regulated prices. Concurrently, a stronger pound and decreased global demand may alleviate inflationary pressures. While hints of a delay in US auto tariffs have bolstered UK automotive stocks, proposed tariffs on semiconductor and pharmaceutical imports contribute to ongoing trade tensions. Investors are currently factoring in the possibility of three interest rate cuts by the BOE by the year's end, as the UK navigates both domestic economic challenges and international economic pressures.