The EUR/GBP currency pair managed to stabilize above the 0.8400 threshold on Tuesday, pausing a six-day losing streak and holding around 0.8420 during early European trading hours. This stabilization comes on the heels of mixed employment data from the United Kingdom, which injected a degree of caution into markets awaiting further macroeconomic clarity. Simultaneously, signals from the European Central Bank (ECB) regarding policy continuity added further support to the euro side of the cross.
Lesrouleaux offers insightful commentary and deep analysis on this matter in their article.
UK Employment Data: Subtle Weakness in the Labor Market
According to the Office for National Statistics (ONS), the UK ILO Unemployment Rate inched higher to 4.5% in the three months to March. This marks a slight uptick from the previous 4.4%, aligning with market expectations but still representing a modest deterioration in labor market conditions. The unemployment rate is a key metric for assessing the overall health of the UK economy and carries important implications for Bank of England (BoE) policy decisions.
Alongside the rise in the unemployment rate, the Claimant Count Change, which measures the change in the number of people claiming jobless benefits, increased by 5,200 in April. While still a rise, this figure came in well below expectations of a 22,300 increase and followed a revised drop of 16,900 in March. The lower-than-expected increase suggests underlying labor demand may not be weakening as rapidly as some forecasts had anticipated.
Employment Change figures added nuance to the report. The UK economy added 112,000 jobs in March, a deceleration from the 206,000 gain seen in February. Though still positive, the slowing pace of job creation could point to moderating labor market momentum, a factor the BoE may monitor closely as it evaluates inflationary risks.
Wage Growth Paints a Mixed Picture
Wage data—an important input in inflation assessments—was similarly mixed. Average Earnings, excluding bonuses, rose 5.6% year-over-year in the three months to March. While this was only slightly below the prior 5.9%, it fell short of the 5.7% that analysts had forecasted. Meanwhile, including bonuses, earnings rose 5.5%, which beat the expected 5.2% but declined from a revised 5.7% in the previous period.
These figures suggest that while wage growth remains elevated, it is showing signs of softening—a development that could ease some of the inflationary pressures faced by the BoE. Nevertheless, wage dynamics remain resilient enough to maintain the bank’s cautious stance on policy easing.
ECB Policy Continuity Supports the Euro
On the Eurozone front, the euro received a modest boost from news that several ECB officials continue to back existing policy strategies, including quantitative easing (QE). According to Reuters, the ongoing policy review is expected to reaffirm the central bank’s current stance, even in the face of internal debate and criticism.
Notably, ECB policymakers appear committed to preserving the bank’s “forceful action” language, especially during periods marked by low inflation and low interest rates. This signals that the ECB is not inclined to make abrupt changes to its forward guidance or monetary toolkit, which lends support to euro stability in the near term.
Market Outlook and EUR/GBP Technical Picture
The EUR/GBP cross remains above the psychological 0.8400 mark, suggesting that the selling pressure seen in previous sessions may be easing. The bounce around 0.8420 indicates that bears may be reluctant to push further without fresh bearish catalysts, especially in light of the ECB’s stable stance and the UK’s uneven employment data.
From a technical perspective, a sustained hold above 0.8400 could pave the way for a short-term recovery toward resistance near 0.8450–0.8470. However, a break below 0.8380 would likely expose the pair to deeper downside levels, with support found at 0.8340 and 0.8300, respectively.
On the upside, attention will turn to upcoming macro events and central bank communications. Should the ZEW sentiment data from Germany surprise to the upside, or if ECB officials continue to push back against premature tightening, the euro could gain further ground. Conversely, any signs of BoE hawkishness in response to wage resilience or new data could tilt the balance back in favor of the British pound.
Conclusion
The EUR/GBP cross has managed to regain footing above 0.8400, buoyed by a combination of weak UK jobs data and supportive signals from the ECB. While the unemployment rate and wage growth figures suggest cooling labor conditions in the UK, they are not weak enough to prompt a dramatic shift in expectations for BoE policy. At the same time, the ECB’s commitment to existing policy frameworks provides a buffer for euro strength.
Traders should watch closely for developments from the ZEW surveys and subsequent ECB commentary, as these will be pivotal in shaping the near-term trajectory of the EUR/GBP cross. As of now, 0.8400 remains a key level to monitor in the evolving Euro-British Pound dynamic.
