Finance
Sterling weakens as soft labour market data supports UK rate cut bets
Published by Global Banking & Finance Review®
Posted on June 10, 2025
2 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 10, 2025
2 min readLast updated: January 23, 2026
The British pound fell due to weak UK labour market data, increasing speculation of rate cuts by the Bank of England.
By Samuel Indyk
LONDON (Reuters) -The British pound fell against the dollar and the euro on Tuesday as soft UK labour market data bolstered investors' bets for more rate cuts this year from the Bank of England.
Pay growth slowed sharply while the unemployment rate rose to its highest level in nearly four years in the three months to April, Britain's Office for National Statistics said.
The downturn appeared to gather pace in May as more timely tax office data showed a slump of 109,000 in the number of employees on company payrolls, the biggest decline since May 2020 at the height of the COVID-19 pandemic.
"The latest official read on UK labour market activity provided broad confirmation that conditions were easing," said Nikesh Sawjani, senior UK economist at Lloyds.
"Should the labour market continue to cool further in the coming months and quarters, consistent with the indication provided by a range of surveys, we believe that should give the Bank of England confidence to deliver further cuts in the Bank Rate over the next year or so."
The pound was last down 0.5% against the dollar at $1.3488, having earlier dropped to its lowest since June 2 at $1.3458.
The Bank of England meets next week and although it is expected to stand pat on rates, money market traders added to bets for additional rate cuts this year.
Short-term rate futures priced in about 48 basis points of cuts by the end of the year, implying about two quarter-point cuts, compared with 39 bps before the data.
"This (labour market data) puts a question mark on the hawkish bias that we've seen from the Bank of England," said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.
"Markets are very firm that we won't get a cut next week, and I think that's definitely the case, but it can open the door when we get to the August meeting."
The pound was down about 0.4% at 84.6 pence per euro, its weakest level against the single currency since May 9.
(Reporting by Samuel Indyk; Editing by Susan Fenton)
The British pound fell due to soft UK labour market data, which indicated a slowdown in pay growth and a rise in the unemployment rate.
Investors are betting on more rate cuts this year, with money market traders pricing in about 48 basis points of cuts by the end of the year.
The pound was down 0.5% against the dollar at $1.3488 and about 0.4% at 84.6 pence per euro, marking its weakest level against the euro since May 9.
Economists noted that the labour market conditions were easing, and if this trend continues, it could lead to further rate cuts by the Bank of England.
The Bank of England is scheduled to meet next week, where it is expected to maintain current rates despite the recent labour market data.
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