EUR/GBP weakens below 0.8550 after surprise fall in UK Unemployment Rate

• EUR/GBP loses momentum around 0.8540 in Tuesday’s European session, down 0.20% on the day. 
• UK Unemployment Rate fell to 4.2% in three months to June; Claimant Count Change came in at 135K in July.
• Bloomberg economists expect the ECB to cut its deposit rate once a quarter through the end of next year. 

The EUR/GBP cross loses traction near 0.8540 during the early European session on Tuesday. The cross edges lower after the recent mixed UK labor market data. The attention will shift to the German August ZEW survey, which is due later on Tuesday.  

Data released by the Office for National Statistics (ONS) on Tuesday showed that the UK ILO Unemployment Rate dropped to 4.2% in the three months to June from 4.4% in the previous period. This figure came in better than the expectation of 4.5%. Meanwhile, the Claimant Count Change increased by 135K in July, compared with a revised gain of 32.3K in June, below the market consensus of 14.5K by a wide margin.

UK Wage inflation, as measured by Average Earnings excluding Bonus climbed 5.4% 3M YoY in June versus 5.7% in May,  besting the estimation of a 4.6% rise. Average Earnings including Bonuses also rose by 4.5%  in the same period, compared to 5.7% quarter through May. The Pound Sterling attracts some buyers in an immediate reaction to the UK employment report.  

On the other hand, the expectation that the European Central Bank (ECB) would ease cycle sooner than previously anticipated weighs on the Euro (EUR).  The ECB is likely to cut its deposit rate once a quarter through the end of next year, according to Bloomberg economists. A Bloomberg survey of forecasters indicated that the benchmark is projected to reach 2.25% in December 2025 after six straight quarter-point declines. Previously, respondents projected that this level would be achieved in the second quarter of 2026.