EUR/GBP keeps hovering below 0.8720 as UK employment data supports Pound

EUR/GBP remains trading without a clear bias, between 0.8700 and 0.8720.
The Pound picked up on Tuesday following an unexpected decline in UK unemployment.
ECB's De Guindos and Eurozone Economic Sentiment data might provide further guidance for the Euro.

Guillermo Alcala FXStreet

The Euro keeps treading water within a broadly 20-pip range against the British Pound (GBP). The pair retreated from session highs at 0.8713, amid upbeat UK unemployment figures, and remains moving without a clear bias, with downside attempts contained above 0.8700 and bulls limited below 0.8720.

Data released by National Statistics on Tuesday revealed that the UK Unemployment Rate fell to 4.9% in the three months to February, from 5.2% in the previous period, and against market expectations of a steady 5.2% reading.

The Claimant Count Change, however, increased by 26.8K in March, from 17.1K in February, well above the 21.4K expected, which suggests that the jobless rate might rise again next month. Average Earnings Excluding Bonus have eased to 3.6% from 3.8% in January, yet above the 3.5% anticipated by the market consensus.

Eurozone's economic sentiment is likely to deteriorate further

In Europe, the focus is on the Eurozone and the German ZEW Economic Sentiment Survey, due later on Tuesday. ZEW figures are expected to show further deterioration in April, highlighting the negative impact of the Middle East war and the higher energy costs on the Eurozone’s economic outlook.

Before that, European Central Bank (ECB) Vice President Luis de Guindos is expected to speak at an event in Madrid, where he may provide further insight into the timing of the next monetary policy tightening move.

Investors remain cautious, with one eye on the US-Iran peace talks. A seizure of an Iranian vessel in the Gulf of Oman by the US military threatened to derail the peace process on Monday, but Tehran seems to be sending a delegation to Pakistan for the next round of talks scheduled for this Tuesday.

Markets remain hopeful of a swift end to the war, which is keeping the Euro and the Pound near recent highs against the US Dollar.

Economic Indicator

ILO Unemployment Rate (3M)

The ILO Unemployment Rate released by the UK Office for National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate goes up, it indicates a lack of expansion within the UK labor market. As a result, a rise leads to a weakening of the UK economy. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.

Why it matters to traders?

The Unemployment Rate is the broadest indicator of Britain’s labor market. The figure is highlighted by the broad media, beyond the financial sector, giving the publication a more significant impact despite its late publication. It is released around six weeks after the month ends. While the Bank of England is tasked with maintaining price stability, there is a substantial inverse correlation between unemployment and inflation. A higher than expected figure tends to be GBP-bearish.

Economic Indicator

Claimant Count Change

The Claimant Count Change released by the UK Office for National Statistics presents the change in the number of unemployed people in the UK claiming benefits. There is a tendency for the metric to influence GBP volatility. Usually, a rise in the indicator has negative implications for consumer spending and economic growth. Generally, a high reading is seen as bearish for the Pound Sterling (GBP), while a low reading is seen as bullish.

Why it matters to traders?

The change in the number of those claiming jobless benefits is an early gauge of the UK’s labor market. The figures are released for the previous month, contrary to the Unemployment Rate, which is for the prior one. This release is scheduled around the middle of the month. An increase in applications is a sign of a worsening economic situation and implies looser monetary policy, while a decrease indicates improving conditions. A higher-than-expected outcome tends to be GBP-bearish.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

EUR/USD remains sidelined around 1.1600

EUR/USD clings to its decent gains on Monday and continues to move in a consolidative mood around the 1.1600 region. Improved risk appetite following the US-Iran agreement to reopen the Strait of Hormuz continues to weigh on the US Dollar, lending support to the risk complex. Looking ahead, investors are likely to remain on the sidelines ahead of Wednesday's FOMC meeting.

GBP/USD retreats from tops, back to 1.3420

GBP/USD keeps its advance past the 1.3400 yardstick at the beginning of the week. In the meantime, Cable continues to draw support from improved market sentiment following reports that the US and Iran have reached a framework agreement aimed at ending the conflict and reopening the Strait of Hormuz.

Gold stays firm, still below $4,400

Gold builds on its recent gains on Monday, climbing well north of the $4,300 mark per troy ounce. The yellow metal benefits from renewed selling pressure on the Greenback as investors reassess the implications of the US-Iran agreement to end hostilities and reopen the Strait of Hormuz. Market participants now turn their attention to Wednesday's FOMC gathering.