Euro holds gains against British Pound as UK unemployment disappoints
- EUR/GBP trades with mild gains around 0.8550 in Tuesday’s early European session.
- UK Unemployment Rate held steady at 4.9%, worse than expected.
- Euro support underpinned by Eurozone resilience.
The EUR/GBP cross posts modest gains near 0.8550 during the early European trading hours on Tuesday. The British Pound (GBP) attracts some sellers against the Euro (EUR) following the UK employment data. Traders brace for the ZEW Survey from Germany and the Eurozone later on Tuesday. On Wednesday, the attention will shift to the UK inflation report.
Data released by the Office for National Statistics (ONS) on Tuesday showed that the UK Unemployment Rate steadied at 4.9% in the three months to June. The figure came in above the market consensus of 4.8%.
Meanwhile, the number of people claiming jobless benefits declined by 11K in July, versus a revised decrease of 6.4K prior and the market expectations of a 11.2K gain. The Employment Change data arrived at 83K in June, compared to 147K seen in May.
The British Pound edges lower in an immediate reaction to the UK jobs data. Financial markets on Monday showed one 25 basis points (bps) interest rate hike priced by the end of 2026, according to Reuters.
On the Euro front, Scotiabank analysts believe that the recent “firming trend in the EUR reflects economic resilience in the Eurozone despite headwinds from energy. The European Central Bank (ECB) is likely to raise interest rates by 25 bps at its September monetary policy meeting. ECB president Christine Lagarde warned last month that renewed Middle East hostilities and the resultant rebound in oil prices pose upside risk to the Eurozone inflation outlook.
Technical Analysis: EUR/GBP remains capped under the 100-day SMA
In the daily chart, EUR/GBP keeps a mildly bearish near-term tone as it holds beneath the 100-day simple moving average (SMA) and the 20-day Bollinger middle band. Price is also trading below the upper Bollinger band, while the Relative Strength Index (14) around 48.5 signals neutral momentum, hinting that downside pressure persists but lacks strong conviction for a sharp selloff.
On the downside, initial support is aligned with the lower Bollinger band at 0.8530, where sellers could begin to take profits if the pair extends its retreat. On the topside, immediate resistance emerges at the 20-day Bollinger SMA around 0.8555, followed by the upper Bollinger band near 0.8582, with a more significant cap at the 100-day SMA at 0.8620; only a sustained break above this cluster of overhead levels would ease the current bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.