UK Unemployment Hits 5-Year High; Gilt Yields Drop
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- UK unemployment rose to 5.2% in December from 5.1%, hitting its highest level since January 2021, with payrolled workers falling 0.4% year-on-year to 30.3 million — 134,000 fewer than January 2025.
- Sterling dropped 0.6% to around $1.353 against the dollar after the jobs release and was last down 0.2% against the euro.
- British gilt yields fell across the curve, with the 10-year down nearly 3 basis points to 4.377% and the 30-year at 5.181%, down 3 bps — the UK still carries the highest long-term borrowing costs in the G7.
- Bank of England futures now fully price two rate cuts this year, with markets assigning a 75% chance of a cut at next month's meeting.
- BHP Group shares closed 1.5% higher after announcing a $4.3 billion long-term silver streaming deal with Wheaton Precious Metals and posting stronger-than-expected fiscal first-half earnings.
- German inflation accelerated to 2.1% in January from 1.8% the prior month, according to the Federal Statistical Office.
- The Stoxx 600 closed 0.5% higher and the FTSE 100 finished up 0.8%, with earnings from Antofagasta, BHP, and InterContinental Hotels Group in focus.
Why it matters: A weakening UK labor market — with rising joblessness AND slowing wage growth — gives the BoE's rate-setting committee clearer cover to deliver two cuts this year, but the 30-year gilt still trading well above 5% shows Britain's long-term borrowing premium is a structural problem interest-rate relief alone won't solve.
