UK Labour Data Fuels Rate Cut Expectations
Solid ECN – The British pound edged slightly lower to $1.25 as traders digested recent labor data and the monetary policy outlook. The UK’s unemployment rate rose for the third month, while wage growth remained steady at 6%. This data aligns with the Bank of England’s (BoE) forecast and suggests that a rate cut could be on the horizon.
The probability of a BoE rate cut by June has increased slightly to 50%. Traders are betting that the central bank will deliver two quarter-point cuts by the end of the year. During its May meeting, the BoE maintained interest rates, but two members advocated for a rate cut, indicating a possible shift towards lower borrowing costs.
Governor Andrew Bailey hinted at potential future rate cuts, suggesting a more accommodative monetary policy ahead. This aligns with market expectations and reinforces the view that the BoE might soon reduce interest rates to support the economy.