FX.co ★ UK 10-Year Gilt Yield Falls to 1-Month Low

UK 10-year gilt yields have recently declined to 4.582%, marking a one-month low, as traders have increased their expectations of interest rate reductions by the Bank of England. The market now almost fully anticipates a rate cut in September, with a roughly 50% chance of an additional cut in November. Looking ahead to 2025, two more cuts are expected, with growing conviction among market participants. This shift in expectations is attributed to recent employment data that came in softer than forecasted. Specifically, headline wage growth, including bonuses, was 5.3% for the three months ending in April, falling short of the anticipated 5.5%. When excluding bonuses, wages increased by 5.2%, while private sector wages saw a 5.1% rise, both figures also below projections. Nevertheless, wage growth remains high and exceeds levels considered by many Bank of England policymakers as consistent with achieving the 2% inflation target. In parallel, the unemployment rate increased to 4.6%, the highest level observed since July 2021.