The EUR/GBP currency pair gained momentum, climbing to around 0.8295 during Tuesday’s early European session, as the Pound Sterling (GBP) weakened against the Euro (EUR). This movement followed the release of mixed UK labor market data, which raised concerns over the UK’s economic outlook.
According to data from the Office for National Statistics (ONS), the UK’s ILO Unemployment Rate rose to 4.3% in the three months to September, up from 4.0% in the previous period. This figure was worse than the expected 4.1%, signaling a deterioration in the labor market. In addition, the Claimant Count Change saw a larger-than-expected increase of 26.7K in October, compared to 10.1K in the previous month (revised from 27.9K). The consensus forecast had anticipated a rise of 30.5K.
In contrast, UK wage growth showed some resilience. The Average Earnings excluding Bonuses increased by 4.8% year-on-year for the three months to September, slightly below the previous month’s 4.9% but still above the consensus estimate of 4.7%. Meanwhile, Average Earnings including Bonuses rose by 4.3% in the same period, beating the revised 3.9% increase recorded in the quarter through August.
The weaker-than-expected unemployment data prompted a swift sell-off in the Pound, with traders reacting to the rising jobless rate. Market participants will now shift their attention to the upcoming German ZEW economic sentiment survey, due later in the day, for further insights into the region’s economic health.
In the broader European context, comments from European Central Bank (ECB) policymaker Robert Holzmann added a layer of uncertainty to the EUR/GBP outlook. Holzmann suggested on Sunday that there was no immediate reason for the ECB to rule out an interest rate cut in December, though any decision would depend on incoming economic data. The market has priced in a near-certainty of a 25 basis-point cut, with a small probability of a more significant 50 basis-point move, which could limit the EUR’s upside in the short term.
As the market digests the latest economic indicators, both the UK labor data and ECB’s monetary policy stance are set to influence the direction of the EUR/GBP cross in the coming days.
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