BOE SEES AN UNEMPLOYMENT RATE OF 4.8% IN 2026, 4.9% IN 2027, 5.1% IN 2028 (JULY: 5.0% IN 2026, 5.3% IN 2027, 5.2% IN 2028)

The Bank of England's latest projections put the UK unemployment rate at 4.8% in 2026, 4.9% in 2027 and 5.1% in 2028, each figure revised down from the July projections of 5.0%, 5.3% and 5.2% respectively. The downward revisions signal a softer path for the labour market than the Bank previously expected, which feeds into the inflation outlook through wage growth and domestic demand. For sterling and gilts, a lower unemployment trajectory can cut both ways: it reduces slack and supports the case for policy to stay restrictive for longer, but it also reflects a less severe demand weakening that may reduce the urgency of rate cuts. Short-dated gilts and sterling are most exposed, since their pricing is tightly linked to expected Bank Rate paths, while the USD effect is indirect and runs mainly through relative policy expectations and rate differentials. Traders should watch the next UK labour market release from the ONS, particularly regular pay growth and claimant counts, alongside the upcoming US nonfarm payrolls report for any read-across to global rate expectations.

The US Dollar (USD) is the world's primary reserve currency and the base for most forex majors. Headlines about Federal Reserve policy, US macro data (CPI, NFP, GDP), and Treasury yield shifts typically drive USD pair direction within seconds of release.

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