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    UK’s average earnings exceed forecasts, reaching 4.7% instead of 4.6%

    by VT Markets
    /
    Jan 20, 2026
    The average earnings in the United Kingdom, including bonuses, rose by 4.7% over three months. This increase was higher than the expected 4.6% for November. These numbers show that salaries are growing a bit more than anticipated. They reflect current economic trends affecting wages.

    Stronger Than Expected November Wage Data

    The November 2025 wage data, at 4.7%, was stronger than we thought. This steady pay growth suggests that inflation pressures aren’t easing as quickly as we hoped. This makes it harder for the Bank of England to plan as we approach the new year. This report comes after the December 2025 inflation rate, which surprised us with a rise to 3.5%, still well above the 2% target. With the Bank Rate at 5.25%, these numbers highlight the BoE’s warnings about cutting rates too soon. We see this as a sign that rates will stay high for an extended period. We believe the market is underestimating the chances of rates remaining at these levels during the summer. The November 2025 data likely delays expectations for the first rate cut, which some anticipated for May or June 2026. Trading strategies should now focus on selling short-term interest rate futures, like the SONIA contracts expiring in mid-2026.

    Support For The Pound Sterling

    The expectation of a more cautious Bank of England should continue to support the pound sterling. We see opportunities to buy GBP calls against the US dollar, especially as the Federal Reserve has indicated a clearer path towards easing. Implied volatility on sterling options might also rise before the February BoE meeting, making long volatility positions more appealing. We should remember the lessons from the inflationary period of the early 2020s, when wage growth drove price increases. The Bank of England faced criticism for acting too slowly back then. This history suggests they will be cautious now, needing strong evidence of a slowdown before considering any rate cuts. Create your live VT Markets account and start trading now.

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