6th February 2026

UK markets continued their strong momentum this week, with the FTSE 100 Index rising 1% to trade at 10,325 points at the time of writing.

The Bank of England kept borrowing costs on hold at 3.75% on Thursday, but signalled that a further interest rate reduction could come as soon as March. The Monetary Policy Committee voted five to four to keep the key rate unchanged after lowering it by 0.25% in December, as the tighter-than-expected vote and the Bank of England’s dovish language prompted investors to increase their bets on a rate cut at the central bank’s next meeting.

The Bank of England also cut its growth forecasts for the next two years and raised its unemployment outlook, while predicting that a weakening labour market will help keep price pressure in check. It said it expects inflation to fall back to roughly its 2% target from April, citing “developments in energy prices” including measures to curb bill increases in last year’s budget.

The central bank cut its forecast for GDP growth to 0.9% in 2026, sharply below the 1.2% previously predicted. GDP will expand by 1.5% in 2027, down from 1.6% in the Bank of England’s November outlook. Unemployment was set to hit 5.3% in the first half of the year, the Bank of England said, above the 5.1% it previously expected. It now sees inflation falling below target to 1.7% in the first quarter of next year, and staying at just 1.8% in early 2028. This is based on a market interest-rate path implying two more rate reductions this year.

Elsewhere, UK house prices rose 0.3% month-on-month in January, according to lender Nationwide, after a 0.4% fall registered in the previous month, which was triggered by uncertainty around potential changes to property taxes in the autumn budget.

Compared with the same month last year, house prices increased by 1% in January to an average of £270,873, in line with analysts’ expectations. Housing market activity is expected to recover in the coming quarters, especially if the improving affordability trend that was seen last year is maintained.

Commodity markets

In the commodity markets, Brent crude futures traded around $67 per barrel on Friday and are set for a weekly fall, as the US and Iran agreed to hold talks in Oman, easing concerns of a potential military conflict between them that could disrupt supply from the key Middle East-producing region.

Uncertainty around whether the talks would go ahead or collapse caused volatile swings in the oil price this week. Iran is open to discussing its nuclear programme, including uranium enrichment, while the US also wants to include Iran’s ballistic missiles, its support for armed proxy groups around the Middle East and its treatment of its own people.

Despite the talks, there are concerns that US President Donald Trump will still carry out his threats to strike Iran, the fourth-largest producer among the Organisation of the Petroleum Exporting Countries, potentially risking a wider confrontation in the oil-rich region.

In addition to the possible disruption of Iranian production in the event of a conflict, there are concerns exports from other Gulf producers could be affected. About a fifth of the world’s total oil consumption passes through the Strait of Hormuz, which lies between Oman and Iran. Other OPEC members, Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, export most of their crude via the strait, as well as Iran itself.

Gold prices traded around $4,925 an ounce on Friday and are set for a weekly fall, after a global tech stock rout and a stronger US Dollar wiped out the precious metal’s gains during a brief rebound earlier this week.

Equity markets

US equity futures rose on Friday, recovering from steep losses in the previous session as concerns over AI-driven disruption eased. In Thursday’s regular trading session, the Dow Jones Industrial Average fell 1.2%, the S&P 500 lost 1.23%, whilst the Nasdaq Composite declined 1.59%.

Job cuts in the US surged in January, making it the worst start to a year since 2009, as several fresh reports suggested the labour market was in a worse state than Federal Reserve policymakers had originally thought. Job cuts last month jumped to 108,435, employment services company Challenger, Gray and Christmas said on Thursday, more than any January since the global financial crisis.

Separate data released by the Bureau of Labor Statistics showed US job openings fell to their lowest level in more than five years in December. Another report indicated that the number of people filing for unemployment insurance jumped at the end of January. The figures suggest the US labour market is less healthy than economists had initially thought, a week after Federal Reserve chair Jerome Powell said it was showing “evidence of stabilisation”.

Data from payroll provider ADP pointed to sluggish hiring by private companies in January, with just 22,000 jobs added, well below market expectations. Still, despite all the gloomy data, the US unemployment rate remains low by historic standards, at 4.4% in December.

The apparent weakness in the labour market comes in spite of strong economic growth as consumers continue to spend and the artificial intelligence build-out supports strong levels of business investment. The artificial intelligence boom is expected to have sweeping implications for the labour market, both driving up productivity and undercutting employment.

Meanwhile, the US Dollar has seen sharp gains this week since President Trump nominated Kevin Warsh as the next Federal Reserve chair, given Warsh’s preference for a smaller Federal Reserve balance sheet and a more cautious approach to policy easing. The nomination also eased concerns about the Federal Reserve’s independence.