EUR/GBP gains ground above 0.8650, traders await UK labor market data

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The EUR/GBP cross trades in positive territory around 0.8685 during the early European session on Monday. The Euro (EUR) edges higher against the Pound Sterling (GBP) as the European Central Bank (ECB) appears to be near the end of its rate-cutting cycle.

EUR/GBP gains traction to near 0.8685 in Monday’s early European session.
ECB policymakers suggested the cycle is "most likely" finished, contingent on the current outlook for growth and inflation remaining stable.
The UK jobs data will take center stage on Tuesday.

The Eurozone inflation eased to the ECB’s target, supporting the view of policymakers that interest rates can stay at current levels unless the economic outlook changes significantly. ECB Vice President Luis de Guindos stated on Thursday that interest rates are at an appropriate level, though he warned of “enormous uncertainty” due to geopolitical risks.

Financial markets currently see limited scope for immediate action, with a chance of rates remaining unchanged at the next meeting. Some analysts expect a rate reduction later in 2026, though a hike is considered unlikely given the subdued inflation backdrop.

UK labor market conditions remained weak in 2025 as companies slowed down hiring to offset the impact of an increase in employers’ contributions to social security schemes. Additionally, the Unemployment Rate in the UK rose to 5.1% in October, the highest since March 2021.

Traders await the UK jobs data on Tuesday, as it might influence market expectations for the Bank of England’s (BoE) monetary policy outlook. Any signs of weakening in the UK labor market could undermine the GBP. On the other hand, a stronger-than-expected outcome could lift the GBP against the EUR in the near term.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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