FTSE 100 Hits Record Highs as Bank of England Rate Cut Speculation Rises
Markets woke up to a bullish start on Tuesday as the FTSE 100 (^FTSE) touched all-time highs, with European indices also moving higher. Traders are now pricing in a growing chance of an interest rate cut by the Bank of England after surprisingly soft UK jobs data.
UK Jobs Data Signals Slack in the Labour Market
The unemployment rate in the UK climbed to 5.2%, the highest in five years, while wage growth — a key metric for monetary policy — slowed sharply.
“The Bank of England’s preferred measure of private sector pay growth has fallen to 3.4%, broadly in line with expectations, while broader measures that include bonuses have slowed even more sharply. Wage growth is now much closer to rates consistent with the 2% inflation target than it was a year ago,” said Jake Finney, senior economist at PwC UK.
With slack building in the labour market and inflation trending in the right direction, analysts say the case for a rate cut is strengthening, potentially as soon as March.
Adding to the picture, UK economic growth slowed dramatically, with Q4 2025 GDP coming in at just 0.1%, putting further pressure on Threadneedle Street’s policymakers.
Equities React: FTSE Up, Pound Down
Despite the weaker economic data, UK equities were in the green. The FTSE 100 opened 0.4% higher, led by gains in heavyweight stocks such as InterContinental Hotels Group (IHG.L) following its strong quarterly results.
The more domestically focused FTSE 250 (^FTMC) saw a modest 0.1% rise, reflecting steady investor confidence in homegrown businesses.
Meanwhile, the pound slid 0.4% against the dollar, dipping below $1.36 as the market reacted to the softer labour data.
European Markets: Mixed Signals
Across the Channel, Germany’s DAX (^GDAXI) slipped 0.1%, adding to yesterday’s losses, as traders await upcoming inflation data. France’s CAC 40 (^FCHI) edged up 0.2%, while the pan-European STOXX 600 (^STOXX) saw a slight 0.1% gain.
In the US, stock futures were down slightly as traders returned from the President’s Day break.
What This Means for Traders
For investors and traders, these developments highlight the interplay between economic data, central bank policy, and market moves:
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UK equities could continue to benefit if rate cut expectations rise.
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The pound may remain under pressure against the dollar.
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European markets will keep a close eye on upcoming inflation and economic growth data.
In short, volatility and opportunity are on the cards — making it a key time to stay alert and plan your trades carefully.
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