The EUR/GBP cross holds positive ground near 0.8685 during the early European session on Tuesday. The Pound Sterling (GBP) softens against the Euro (EUR) after the UK employment data. Traders will take more cues from the speech by the European Central Bank (ECB) policymaker Joachim Nagel later on Tuesday.
Data released by the UK Office for National Statistics on Tuesday showed that the country’s ILO Unemployment Rate stayed at 5.1% in the three months to November, versus 5.1% prior. This figure came in above the market consensus of 5.0% during the reported period. Meanwhile, the Claimant Count Change rose by 17.9K in December versus a decrease of 3.3K prior. The mixed UK employment report failed to boost the GBP against the EUR.
Traders will closely monitor the release of the UK Consumer Price Index (CPI) inflation data for December, which is due on Wednesday. This report could offer some hints about the Bank of England’s (BoE) monetary policy outlook.
The European Central Bank (ECB) signaled it is on a steady rate path for now, with no near-term debate on further rate changes if current economic projections hold. This, in turn, could provide some support to the Euro in the near term.
The ECB has kept rates on hold since ending a rate cut cycle in June 2025 and hinted at the December policy meeting that it was in no hurry to change policy again. The Governing Council will continue to follow a “data-dependent and meeting-by-meeting approach,” without pre-committing to a specific future rate path. ECB officials further stated that decisions will be based on the assessment of the inflation outlook.
Employment FAQs
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.
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.
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.
Source: https://www.fxstreet.com/news/eur-gbp-holds-gains-above-08650-after-uk-employment-data-202601200721
