Pound-to-Euro Slips as UK Labour Market Loses Momentum

Modified: Tuesday, 18 August 2026 23:46 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Slips as UK Labour Market Loses Momentum

The Pound to Euro (GBP/EUR) exchange rate edged lower on Tuesday after the latest UK labour market figures pointed to a loss of momentum in employment.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1688, down modestly from Tuesday's opening levels.

The Pound (GBP) struggled on Tuesday as the latest UK employment figures raised fresh concerns about the health of the domestic labour market.

According to the Office for National Statistics (ONS), the unemployment rate remained unchanged at 4.9% in June, falling short of expectations for a decline to 4.8%.

The figures also showed that hiring momentum had weakened considerably, with the pace of job creation roughly halving from the previous month.

Meanwhile, wage pressures continued to ease. Regular earnings growth slowed from 4.4% to 4.1% in June, suggesting underlying inflationary pressures may be beginning to moderate.

The softer data prompted GBP investors to scale back expectations that the Bank of England (BoE) will resume raising interest rates before the end of 2026, weighing on Sterling.

The Euro (EUR) enjoyed some support on Tuesday as investors welcomed a stronger-than-expected improvement in German economic sentiment.

The latest ZEW survey showed confidence in the Eurozone's largest economy rising more sharply than anticipated in August, with respondents seemingly encouraged by signs that recent government fiscal measures are beginning to have a positive impact.

Despite the upbeat release, the Euro's gains remained relatively restrained, with the single currency continuing to be influenced by broader movements in the US Dollar (USD).

Near-Term GBP/EUR Forecast: UK Inflation Data to Set the Tone

Looking ahead to Wednesday, the latest UK consumer price index will take centre stage and could provide a fresh source of volatility for the Pound to Euro exchange rate.

Markets are anticipating an acceleration in inflation during July, with renewed tensions in the Gulf contributing to higher energy costs. A stronger-than-expected reading could revive expectations of further BoE rate increases and provide Sterling with a lift.

Conversely, another downside surprise in inflation could reinforce expectations for a more cautious approach from the BoE and leave the Pound vulnerable to further losses.

For Euro investors, attention will also turn to comments from European Central Bank (ECB) President Christine Lagarde. A hawkish assessment of the Eurozone's economic outlook could offer additional support to the single currency.

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TAGS: Pound Euro Forecasts