British Pound to Euro Forecast: GBP Slips as UK Jobs Data Fuels BoE Doubts

Modified: Tuesday, 18 August 2026 12:16 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: GBP Slips as UK Jobs Data Fuels BoE Doubts

The Pound to Euro (GBP/EUR) exchange rate lost ground on Tuesday after the latest UK labour-market data reinforced evidence that employment conditions are cooling.

GBP/EUR traded around 1.1684 during the European session, down approximately 0.1% on the day after failing to hold above 1.1700.

According to ING; “We are still hanging on to slightly negative sterling views, even though M&A inflows may be providing temporary support.”

The bank sees scope for GBP/EUR losses towards 1.1650.

The latest employment figures disappointed expectations that the UK labour market would strengthen towards the end of the second quarter.

The unemployment rate held at 4.9% in the three months to June, compared with consensus forecasts for a decline to 4.8%.

Employment increased by 83,000 during the quarter, well below market expectations, while vacancies fell to 707,000 in the three months to July.

Payrolled employment also declined again, reinforcing evidence that demand for labour has weakened.

Of particular importance for the Bank of England, private-sector wage growth slowed to 2.8% year-on-year, its weakest rate since late 2020.

The figures eased pressure on the BoE to raise interest rates again in the near term.

MUFG had commented ahead of the release; “The economy is entering Q3 with solid momentum, supported by encouraging signs for retail spending. While economic growth has been stronger than anticipated, the labour market has remained relatively weak, providing the BoE with scope to keep interest rates on hold.”

Tuesday's figures broadly reinforced that assessment.

The Euro has also maintained a relatively firm tone in global markets, adding to the pressure on GBP/EUR.

ING commented; “Even though the euro is far from a high-yielder, it seems international investors like the eurozone as a diversification play against the US AI boom.”

The single currency has benefited from relatively resilient Eurozone economic data and expectations that the European Central Bank will deliver another interest-rate increase in September.

A Reuters poll last week found that a large majority of economists expect the ECB to raise its deposit rate to 2.50% next month.

This contrasts with increasing doubts over whether the Bank of England needs to tighten further following Tuesday's softer labour-market figures.

Near-Term GBP/EUR Forecast: UK Inflation Now the Key Sterling Test

Attention will now turn to Wednesday's UK inflation release.

Headline inflation is expected to rebound from 2.6% in June to around 2.9% in July as higher household energy costs feed through to consumer prices.

Core inflation is expected to edge down from 2.6% to around 2.5%.

Investec economist Ellie Henderson had commented; “It was already clear at the publication of the June print that any easing in inflationary pressures as per the headline measure wouldn’t last for long, with the July increase to the Ofgem energy price cap likely to erase any progress towards the Bank of England’s two per cent target.”

Underlying inflation measures will therefore be watched particularly closely.

ING's James Smith expects the UK data flow to be too soft to justify the amount of BoE tightening previously priced into money markets.

The bank sees scope for EUR/GBP to advance towards 0.8575-0.8585, equivalent to GBP/EUR falling towards the 1.1650 area.

ING also cautioned; “Additionally, recall that the suspicion of faulty seasonal adjustments means that UK activity data typically comes in softer in the second half of the year than the first.”

For GBP/EUR, 1.1650 is therefore the immediate downside level to watch.

A stronger-than-expected inflation report could revive BoE rate-hike expectations and allow the pair to recover above 1.1700.

Conversely, a benign underlying inflation reading would reinforce Tuesday's softer labour-market message and increase the risk of a move towards 1.1650.

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TAGS: Pound Euro Forecasts