- EUR/GBP trades in positive territory near 0.8450 in Tuesday’s early European session.
- UK Unemployment Rate climbed to 4.4% in three months to November; Claimant Count Change came in at 0.7K in December.
- The dovish remarks from the ECB could weigh on the shared currency.
The EUR/GBP cross extends its upside to near 0.8450 during the early European session on Tuesday. The Pound Sterling (GBP) weakens after the UK employment report. Later on Tuesday, traders will keep an eye on Germany’s ZEW Survey for January for fresh impetus.
Data released by the UK Office for National Statistics on Tuesday showed that the country’s ILO Unemployment Rate ticked higher to 4.4% in the three months to November. This figure missed the expectations of 4.3% during the reported period. Meanwhile, the Claimant Count Change increased by 0.7K in December versus -25.1K (revised from 0.3K) prior, beating the expected 10.3K figure. The GBP remains weak in an immediate reaction to the mixed UK employment report.
Additionally, an unexpected decline in the UK Retail Sales data has prompted the Bank of England’s (BoE) dovish bets, which weigh on the GBP. The UK central bank is widely anticipated to cut the interest rate by 25 bps at its February meeting. The markets have priced in a total of more than 75 basis points (bps) total rate cuts throughout 2025, up from around 65 bps before the data.
On the other hand, more aggressive market bets on the European Central Bank (ECB) rate cuts could exert some selling pressure on the Euro (EUR). UBS analysts expect at least 150 bps of rate cuts from the ECB over the next 12 months. The ECB policymakers agreed in the December meeting that interest rate cuts should be approached cautiously and gradually, but they also noted that more rate cuts were likely coming given weakening price pressures.
Pound Sterling FAQs
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).
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.
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.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Editors’ Picks
GBP/USD drops to 1.2250 area on broad USD strength
GBP/USD stays under bearish pressure and trades deep in the red near 1.2250 on Tuesday as the USD gathers strength following US President Trump’s tariff threats. The data from the UK showed that the ILO Unemployment Rate edged higher to 4.4% in the three months to November.
Trusted Broker Reviews for Smarter Trading
VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.
