UK average earnings excluding bonuses rose by 4.2% in the three months to December, year on year. This matched expectations.<\/p>\n
The measure covers pay growth over a rolling three-month period. The reported rate was 4.2% for December.<\/p>\n
The average earnings figure for December 2025 came in exactly as expected at 4.2%, but this should not be mistaken for good news. This level of wage growth is still too high for the Bank of England to feel comfortable about inflation in the long term. It reinforces the idea that the path for interest rate cuts in 2026 will be slow and cautious.<\/p>\n
This wage data is especially concerning when we consider that last week’s January 2026 inflation print ticked up to 3.1%, surprising many who had hoped for a continued fall. With the Bank Rate holding at 4.75% since last summer, the market is now aggressively pricing out the chance of a rate cut before the third quarter. Looking back, similar wage persistence throughout 2025 was the primary reason the Bank of England paused its cutting cycle.<\/p>\n
In the currency markets, this reinforces a bullish outlook for the pound against currencies with a more dovish central bank policy. We see value in buying near-term GBP\/USD call options, as the interest rate differential between the UK and the US is likely to widen in Sterling’s favour. The pair has found solid support around the 1.2850 level, providing a clear basis for these trades.<\/p>\n
For equity traders, the situation suggests caution for the domestic-focused FTSE 250 index. The prospect of borrowing costs remaining higher for longer will continue to squeeze corporate profits and limit growth prospects. We would consider using futures to establish short positions or buying put options on the index as a hedge against a potential downturn in the coming weeks.<\/p>\n
The most direct play is in the interest rate markets, where we expect short-sterling futures to continue selling off. The implied yield on the December 2026 contract has already risen 20 basis points this month. There is still room for this trend to continue as the market fully digests that rate cuts are not imminent.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" UK average earnings excluding bonuses rose 4.2% year-on-year in three months to December, matching expectations overall.<\/p>\n","protected":false},"author":62,"featured_media":17033,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42058","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t