UK labour market data show continued weakness, with HMRC payrolled employees falling for a fifth month. The January flash estimate points to an 11k monthly fall.<\/p>\n
Redundancies remain high at 145k in the three months to Dec-25, based on LFS data. The unemployment rate rose to 5.2% over the same period.<\/p>\n
The single-month unemployment rate is 5.4%. Youth unemployment reached 16.1% in the three months to December.<\/p>\n
Among economically inactive people aged 16\u201364, 23% want a job. Hiring intentions are described as limited across surveys.<\/p>\n
Deutsche Bank expects slack in the labour market to increase further. It forecasts two more Bank of England rate cuts this year, likely by summer.<\/p>\n
The expectation is based on wage growth easing and CPI projected to move closer to target by spring.<\/p>\n
The persistent weakness in the UK jobs market should signal a clear direction for our strategy. With signs of rising slack, such as the unemployment rate from December 2025 hitting 5.2%, we should anticipate the Bank of England acting sooner rather than later. We can position for lower interest rates by looking at SONIA futures, which will rally as rate cut expectations become more concrete.<\/p>\n
This view is strengthened by the most recent data released just this week. The Office for National Statistics confirmed the unemployment rate is holding stubbornly high at 5.3%, while wage growth has now slowed to 4.0%, down significantly from the highs we saw in 2025. This gives the Bank of England the clear justification it needs to begin easing policy to support the labour market.<\/p>\n
These rate cuts will likely put downward pressure on the British Pound. We should consider strategies that benefit from a weaker sterling, such as buying put options on GBP\/USD. This allows us to profit from a potential slide in the currency’s value as the interest rate differential with the US narrows.<\/p>\n
We saw a similar pattern in previous easing cycles, like the one following the 2008 financial crisis, where aggressive rate cuts led to a significant depreciation of the pound. The current economic backdrop, with slowing inflation and a stagnant jobs market, mirrors historical precedents for currency weakness. Therefore, we should not expect this time to be different.<\/p>\n
Conversely, a lower interest rate environment is typically supportive for equities. We could look at buying call options on the FTSE 250 index, which is more domestically focused and sensitive to the health of the UK economy. A rate cut would lower borrowing costs for these companies and could stimulate a stock market rally by summer.<\/p>\n
Finally, the shift in central bank policy will likely increase market volatility. The uncertainty around the timing and magnitude of the cuts will create larger price swings in both currency and equity markets. We should consider buying options that profit from this expected rise in volatility, providing a hedge regardless of the market’s ultimate direction.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" UK labour market stays weak: payrolled staff fall fifth month, unemployment up; Deutsche Bank expects two BoE cuts.<\/p>\n","protected":false},"author":62,"featured_media":17031,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42070","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42070","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42070"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42070\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17031"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42070"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42070"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42070"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}