GBP loses yesterday's gains

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waterman

Written by Dan Waterman
November 11th 2025
Money markets price in an 81% chance of a December interest rate cut by the BoE up from 61%..

The UK's unemployment rate rose faster than expected in September (5% v 4.9% forecast & 4.8% prior) and total payrolled employees currently stands at the lowest since September 2023.

Whilst still being a far cry from what many economists were anticipating this year for the UK, the data is nonetheless negative.

Payrolled employment in October saw the biggest monthly fall since November 2020 and average earnings (a key driver for the BoE in inflation targets) also fell further than consensus.

All-in-all, the soft data has seen the Pound move lower because the chances of a UK interest rate cut and faster future cuts have risen.

In our view, there was never any doubt that the BoE would cut interest rates next month (roughly once per quarter has been the consistent play). Today's news just cements that, but also may increase the cutting cycle for next year (£ lower today because of this).

Last year and the beginning of this year we have been explaining that a key reason for the £-€ rate in particular being so strong, was the real and future divergence of UK/EU interest rates.

The higher the interest rate, the higher the investor yield, the more assets and currency investors buy which adds value to the currency.

The EU have both inflation and interest rates stable and the UK has neither. Falling UK interest rates will devalue the Pound, make no mistake about that, meaning the worse is probably yet to come for this pair..