British Pound stays on the back foot against Euro after mixed UK employment details

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The EUR/GBP cross attracts some dip-buyers on Tuesday, stalling the previous day's sharp retracement slide from the 0.8730 area, or the highest since April 7.

EUR/GBP regains traction following the previous day’s turnaround from over a one-month top.
The UK political crisis continues to weigh on the GBP and support the cross amid a hawkish ECB.
The mixed UK jobs report fails to impress the GBP bulls or provide any impetus to spot prices.

The EUR/GBP cross attracts some dip-buyers on Tuesday, stalling the previous day's sharp retracement slide from the 0.8730 area, or the highest since April 7. Spot prices stick to modest gains near the 0.8680 region through the early European session and move little following the release of the latest UK employment details.

The UK Office for National Statistics (ONS) reported that the ILO Unemployment Rate unexpectedly rose to 5% during the three months to March, from 4.9% previous. Additional details revealed that the number of people claiming jobless benefits came in at 26.5K in April, compared to 27.3K anticipated. However, a downward revision of the Claimant Count Change for the previous month, from 26.8K to 4.9K, helps limit the downside for the British Pound (GBP) and acts as a headwind for the EUR/GBP cross.

Any meaningful GBP appreciation, however, seems elusive in the wake of a deepening UK political crisis. UK Prime Minister Keir Starmer is reportedly facing growing internal pressure amid rising speculation over a possible leadership challenge and tensions within his party. In fact, Britain's former health secretary announced his intention to oust Starmer last week. This might hold back traders from placing aggressive bullish bets around the GBP and continue to lend support to the EUR/GBP cross.

The shared currency, on the other hand, continues to draw support from hawkish comments by European Central Bank (ECB) policymakers. In fact, ECB Governing Council member Yannis Stournaras said over the weekend that a modest ECB interest-rate increase could temper inflation without causing economic damage. This further favors the EUR/GBP bulls, suggesting that any corrective pullback could be seen as a buying opportunity and is more likely to remain cushioned.

Economic Indicator

ILO Unemployment Rate (3M)

The ILO Unemployment Rate released by the UK Office for National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate goes up, it indicates a lack of expansion within the UK labor market. As a result, a rise leads to a weakening of the UK economy. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.

Why it matters to traders?

The Unemployment Rate is the broadest indicator of Britain’s labor market. The figure is highlighted by the broad media, beyond the financial sector, giving the publication a more significant impact despite its late publication. It is released around six weeks after the month ends. While the Bank of England is tasked with maintaining price stability, there is a substantial inverse correlation between unemployment and inflation. A higher than expected figure tends to be GBP-bearish.