Data released by the UK government on Tuesday revealed that the country's unemployment rate climbed to its highest level in five years during January, accompanied by a slowdown in wage growth. This data led to a decline in the pound's exchange rate and a drop in UK government bond yields.
At 12:30 GMT (7:30 AM EST), the pan-European Stoxx 600 index was trading near the flatline. Major regional European stock markets generally advanced, with Italy's FTSE MIB index rising 0.5% and Germany's DAX index gaining 0.1%. France's CAC 40 index gave up its earlier gains, edging slightly into negative territory by the afternoon.
The UK's FTSE 100 index rose 0.4% during afternoon trading.
The official UK pay and employment report released on Tuesday showed that the number of employees on payrolls fell by 0.4% year-on-year in January 2026 to 30.3 million. This represents a reduction of 134,000 employees compared to January 2025 and a decrease of 11,000 from the previous month. Meanwhile, the unemployment rate increased to 5.2% in December, up from 5.1% a month earlier.
Following the data release, the pound fell against the US dollar, declining 0.5% in late trading to $1.356 per pound. The pound also weakened against the euro, down 0.2% by the close.
Samuel Fuller, Director of Financial Markets Online, stated that the UK unemployment rate is now at its "highest level since January 2021," marking a five-year high.
After the employment figures were published, yields on UK government bonds, commonly known as gilts, fell across the board. The yield on the 10-year gilt dropped nearly 4 basis points to 4.367%, while the 30-year gilt yield declined 4 basis points to 5.168%.
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