Pound Slips as UK Jobs Data Fails to Impress BoE

The British Pound (GBP) to Euro (EUR) exchange rate fell by approximately 0.1% on Tuesday, trading around 1.1684 during the European session. The decline was attributed to the release of UK labour-market data, which showed a slower employment increase than expected.

The unemployment rate remained at 4.9% in the three months to June, and private-sector wage growth slowed to 2.8% year-on-year, its weakest rate since late 2020. MUFG noted that the economy is entering Q3 with solid momentum but a relatively weak labour market, providing the Bank of England (BoE) with scope to keep interest rates on hold.

ING believes there is scope for GBP/EUR losses towards 1.1650, and the bank sees EUR/GBP advancing towards 0.8575-0.8585. ING cautioned that UK activity data typically comes in softer in the second half of the year than the first due to faulty seasonal adjustments.

Attention will now turn to Wednesday's UK inflation release, with headline inflation expected to rebound from 2.6% in June to around 2.9% in July. A stronger-than-expected inflation report could revive BoE rate-hike expectations and allow the pair to recover above 1.1700.