Sterling weakens on rising UK jobless, French risks weigh on euro

The EURGBP price remains on a firm footing on Tuesday, trading around 0.8710, up 0.40% for the day. The British pound weakened after softer-than-expected UK labour market data, which strengthens market expectations for further monetary easing by the Bank of England.

According to the Office for National Statistics (ONS), the UK ILO Unemployment Rate rose to 4.8% in the three months to August, up from the previous and forecasted 4.7%. The Claimant Count Change increased by 25,800 in September, signaling further signs of cooling labour demand.

Meanwhile, the Average Earnings Excluding Bonus rate slowed to 4.7% YoY in the June-August period, the weakest pace since May 2022.

Analysts at ING noted that these figures confirm a sustained cooling of the UK labour market.

Francesco Pesole, FX strategist at ING, said that, “a November BoE cut now looks unlikely. But December – after the Autumn Budget – is more in play than markets are pricing.”

In the Eurozone, the single currency benefits only modestly from a slight improvement in German economic sentiment, while lingering political uncertainty in France continues to weigh on investor’s confidence.

French President Emmanuel Macron reappointed Sébastien Lecornu as Prime Minister, but opposition leaders immediately filed a no-confidence motion, with the vote scheduled for Thursday. This instability limits the Euro’s rebound potential, even as the British pound weakens.

Investors will keep a close eye on France’s upcoming budget presentation.

According to ING, as long as the French political situation remains unsettled, “the Euro is unlikely to stage a meaningful rebound.”

(Source: OANDA)