EUR/GBP remains capped below 0.8600 following UK employment data

• EUR/GBP weakens to 0.8590 following the UK employment data on Tuesday. 
• The UK Unemployment Rate climbed to 4.3% in the three months to March from 4.2%, as expected. 
• The markets are largely pricing in the ECB rate cut as early as next month, with two possible further cuts this year.

The EUR/GBP cross trades on a softer note near 0.8590 during the early European trading hours on Tuesday. The cross faces rejection after retracing from its nearly 0.8600 psychological level due to mixed UK employment data. The attention will shift to the ZEW Survey from the Eurozone and Germany, along with the ECB's Schnabel speech later in the day. 

The latest data from the UK Office for National Statistics on Tuesday showed that the ILO Unemployment Rate rose to 4.3% in the three months to March from 4.2% in the previous reading, in line with the market consensus of 4.3%. Meanwhile, the number of people claiming jobless benefits rose by 8.9K in April from a decline of 2.4K in March. The UK Employment Change came in at -177K in the three months to March, versus a -156K decrease in the previous reading. However, these reports had little to no market reaction to the Pound Sterling (GBP).

On the Euro front, the European Central Bank (ECB) kept rates on hold at a record high at its meeting last month, as widely expected. The ECB policymakers hinted that a June rate cut was much in consideration as inflation measures continued to decline and wage growth eased. Investors will take more cues from the advanced Eurozone Gross Domestic Product (GDP) for Q1, due on Wednesday about the economic outlook. In case of a weaker-than-expected outcome, this might weigh on the Euro (EUR) and drag the EUR/GBP cross lower.