The British pound weakened to approximately $1.22, weighed down by a stronger dollar as Donald Trump was sworn in as President of the United States, reigniting concerns over tariffs. In the UK, wage growth accelerated to a six-month high in the three months leading up to November, in line with expectations. However, the unemployment rate unexpectedly rose to 4.4%, accompanied by the sharpest drop in payroll numbers since November 2020, indicating potential softening in the labor market. Additionally, last week’s data revealed an unexpected slowdown in inflation and weaker-than-anticipated economic growth. Against this backdrop, the Bank of England is widely expected to reduce the key interest rate by 25 basis points to 4.5% next month. Markets are also betting on one or two more reductions after February.
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