EUR/GBP rises to near 0.8800 following UK jobs data, German ZEW Survey eyed

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EUR/GBP rises after halting its four-day losing streak, trading around 0.8800 during the early European hours on Tuesday. The currency cross appreciates as the Pound Sterling (GBP) loses ground following the release of the United Kingdom (UK) labor market report.

EUR/GBP appreciates as the Pound Sterling declines following weaker UK labor data.
UK ILO Unemployment climbed to 5.0%, while Employment Change data arrived at -22K in the three months to September.
The Euro finds support from the European Central Bank’s cautious stance on its policy outlook.

UK ILO Unemployment rose to 5.0% in the three months to September after reporting 4.8% prior, against the market expectations of 4.9%. The Employment Change data arrived at -22K in September versus 91K in August.

UK Average Earnings, excluding bonuses, in the three months to September, edged higher by 4.6% following a 4.7% growth booked previously. The market consensus was for a 4.6% reading. Meanwhile, Average Earnings, including Bonus, increased by 4.8% in the same period after accelerating by 5.0% in the quarter through August. The data missed the estimate of 4.9%.

The EUR/GBP cross also draws support as the Euro (EUR) receives support from the cautious tone surrounding the European Central Bank (ECB) policy outlook. Traders anticipate the ECB will keep interest rates unchanged for now, backed by steady economic performance and inflation near target. Money markets see only a 40% chance of a rate cut by September 2026.

ECB Vice President Luis de Guindos said Monday that current policy rates are appropriate, emphasizing the need for the bank to stay “very prudent and cautious,” despite reduced uncertainty following a recent US-EU trade deal.

Employment FAQs

How do employment levels affect currencies?

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.

Why is wage growth important?

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.

How much do central banks care about employment?

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.