Pound Sterling Higher Against Euro and Dollar on UK Wages Beat

July 17, 2025 - Written by Ben Hughes

STORY LINK Pound Sterling Higher Against Euro and Dollar on UK Wages Beat

Pound Sterling advanced against the Euro (EUR) nd US Dollar (USD) on Thursday after the latest data from the ONS showed Average weekly earnings (excluding bonuses) rose by 5.0% three months year-over-year in May, above the consensus 4.8%.

The Pound to Dollar exchange rate (GBP/USD) settled little changed around 1.3390 while the Pound to Euro exchange rate (GBP/EUR) advanced to 1.1550 from 1.1525.

There was an element of relief following the latest UK labour-market data with no evidence of an employment slump, but the Pound overall remained on the defensive with further clear signs that the jobs market is weak enough to trigger interest rate cuts.

The UK unemployment rate increased to 4.7% in the three months to May from 4.6% previously. This was above consensus forecasts of 4.6% and the highest rate since August 2021.

The May decline in payrolls was revised sharply to 25,000 from the flash estimate of a 109,000 slide while there was a further provisional 41,000 decline for June.

Vacancies fell by a further 56,000 and have fallen every month for the past three years.

As far as wages are concerned, headline average earnings slowed to 5.0% in the three months to May from 5.4% previously and in line with consensus forecasts while underlying wages growth also slowed to 5.0% from 5.3%.


There is clear evidence of a weaker labour market and markets will remain convinced that the Bank of England will cut interest rates at the August policy meeting.

Rob Wood of Pantheon Macroeconomics sees the labour market as more resilient than the Bank of England had feared, arguing that “the MPC would be well advised to steer clear of assuming employment is falling fast.”

The conomist still expects a rate cut in August but only a single move, noting a shift in view: “We now look for a one-and-done cut in August.”

Despite stronger jobs data, he admits the decision is finely balanced, adding “the August decision is closer than the market prices.”

UK economists at Barclays view the latest UK labour market data as broadly reassuring, noting the figures “lack sufficient signs of stagflation” and support a more positive UK outlook.

However, their trading desk remains cautious on the Pound Sterling outlook against the Euro and US dollar, stating that “the market is likely to stay somewhat bearish GBP given the broader fiscal backdrop and elevated inflation.”

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TAGS: Pound Sterling Forecasts