Key Moments
- EUR/GBP traded with modest gains around 0.8550 in early European dealings, with GBP pressured after UK labor figures
- UK Unemployment Rate held at 4.9% in the three months to June, above market expectations of 4.8%
- Analysts at Scotiabank highlighted Eurozone resilience and anticipated a 25 bps ECB rate hike at the September meeting
EUR/GBP Supported as UK Jobs Data Misses Expectations
EUR/GBP was slightly firmer around 0.8550 during early European trading on Tuesday, as the British Pound came under renewed selling pressure following the latest UK employment release. Market participants also looked ahead to the ZEW Survey results for Germany and the broader Eurozone later in the session, with focus expected to shift toward the UK inflation report on Wednesday.
Figures from the Office for National Statistics (ONS) showed that the UK Unemployment Rate remained at 4.9% in the three months to June, overshooting the market forecast of 4.8%. The data reinforced a softer narrative around the UK labor market and weighed on GBP demand against the Euro.
The reaction in FX markets saw the British Pound move lower immediately after the publication of the jobs report. According to Reuters, market pricing on Monday reflected expectations for one 25 basis points (bps) interest rate increase by the end of 2026.
UK Labor Market Details
Alongside the unemployment rate, other labor indicators painted a mixed picture:
| Indicator | Latest Reading | Previous | Market Expectation |
|---|---|---|---|
| Unemployment Rate (3 months to June) | 4.9% | – | 4.8% |
| Jobless Claims (July) | -11K | -6.4K (revised) | +11.2K |
| Employment Change (June) | 83K | 147K (May) | – |
The number of jobless claims fell by 11K in July, compared with a revised 6.4K decline previously, and sharply diverging from expectations for an 11.2K increase. However, Employment Change slowed to 83K in June from 147K in May, signaling some loss of momentum in hiring.
Eurozone Backdrop and ECB Outlook
On the Euro side, sentiment remained underpinned by perceptions of relative resilience in the Eurozone economy. Scotiabank analysts stated that the recent
“firming trend in the EUR reflects economic resilience in the Eurozone despite headwinds from energy.”
The same analysts indicated that the European Central Bank (ECB) is likely to implement a 25 bps rate rise at its September monetary policy meeting. Policymakers continued to watch inflation risks closely after ECB president Christine Lagarde cautioned that renewed tensions in the Middle East and the associated rebound in oil prices could create upside risks to the Eurozone inflation outlook.
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