Weak employment data rekindles expectations of interest rate cuts: money markets pricing in Bank of England cutting interest rates twice within the year.

Notice that, as the unemployment rate in the UK has risen to its highest level in nearly five years and wage growth has slowed, traders have increased their bets on the Bank of England further cutting interest rates. Data from the UK National Statistics Office on Tuesday showed that the unemployment rate in the fourth quarter of last year rose to 5.2%, exceeding the median analyst expectations. The Bank of England's preferred wage indicator - regular wage growth in the private sector has fallen to 3.4%, the lowest level in over five years. The money market is currently fully pricing in two 25 basis point rate cuts before the end of the year, meaning the base rate will fall to 3.25% for the first time in this easing cycle. At the beginning of the month, the market's expectation probability was only 50%. As of writing, the pound has fallen against the US dollar, dropping more than 0.5% to $1.3553, its lowest level since February 6. At the beginning of the month, due to the Bank of England being just one vote away from cutting rates, and Governor Andrew Bailey seemingly supporting market bets on a rate cut in March, bets on further easing have soared. Tuesday's data may further convince policymakers that inflationary pressures in the labor market are easing at a fast enough pace, paving the way for another rate cut. Forward contracts show that the probability of a 25 basis point rate cut next month has increased from about 70% on Monday to nearly 80%. The market believes that a rate cut by April has already been settled. Policy maker Sarah Breedon said last week that it is a "reasonable expectation" to further cut rates by 25 basis points by the end of April - she emphasized that a looser labor market should be leading to a fading of wage and price inflation stickiness.