GBP/USD extends losses below 1.3600 as UK labour data disappoints

GBP/USD dives following UK employment data to hit fresh 10-day lows at 1.3570.
UK Unemployment Rate rose to a nearly five-year high of 5.2% in December.
Average earnings slowed down, pointing to further BoE easing.

Guillermo Alcala FXStreet

The Pound (GBP) accelerated its reversal against the US Dollar (USD) on Tuesday, dipping below 1.3600 and reaching session lows around 1.3570 at the time of writing. UK data released on Tuesday revealed an unexpected unemployment increase in December, adding pressure on the BoE to lower borrowing costs further.

The UK ILO Unemployment Rate rose to 5.2% in the three months to December, its highest level in nearly five years, against market expectations of a steady 5.1% reading. The Claimant Count Rate rose to 28.6K in January, from 2.7K in December, while the employment change dropped to 52K from 82K in the previous month.

Wage inflation also fell, with the Average Earnings Including Bonus slowing down to a 4.2% year-on-year growth in the last three months of 2025, from 4-6% in the previous month. The market consensus had anticipated a steady 4.6% reading.

These figures follow the weak UK Gross Domestic Product (GDP) report released last week, casting further doubt about the health of the UK economy and strengthening the case for a further monetary easing by the Bank of England (BoE) at its next monetary policy meeting in March. This is likely to keep the British Pound under pressure against its main peers over the coming sessions.

(This story was corrected on February 17 at 08:24 GMT to say that the ILO Unemployment covered the three months to December, and not to January, and that the Average Earnings Including Bonus was 4.6%, and not the Average Earnings Excluding Bonus, as previously stated.)

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

Average Earnings Including Bonus (3Mo/Yr)

The Average Earnings Including Bonus, released by the UK Office of National Statistics, is a key short-term indicator of how levels of pay are changing within the UK economy. Generally, an increase in earnings is seen as bullish for the Pound Sterling (GBP), whereas a low reading is seen as bearish.

AUD/USD remains below 0.7000 amid light trading

AUD/USD fills a modest bearish gap on Monday, but remains below 0.7000 in the Asian session amid holiday-thinned liquidity. The US Dollar attempts a bounce even as US bond yields pull back from multi-year highs, limiting the pair. Moreover, diminishing odds of another RBA rate hike in November cap the Aussie.

USD/JPY hovers above 158.00 amid Japan/ US holiday

USD/JPY extends its range-bound price action into a new week, trading above 158.00 as bulls remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. Meanwhile, softer US bond yields keep US Dollar bulls on the back foot and cap the pair's upside. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold remains vulnerable below $4,200 on Fed hike bets

Gold is under mild selling pressure on Monday, trading at around $4,170. The US Dollar advances modestly in thin trading, supported by bets that the Federal Reserve will hike rates at least one more time before year-end.

Bitcoin struggles as ETF outflows, geopolitical uncertainty weigh

Bitcoin hovers around $83,600 on Monday after a 3.1% correction last week. US-listed spot ETFs recorded an outflow of $681.10 million last week, snapping the three-week inflow streak. Geopolitical uncertainty and mixed signals keep investors cautious.

The week ahead: A critical week as earnings and CPI test market

The Oil price is relatively stable this morning, and US and European stock markets are poised to open higher, as risk sentiment shrugs off an escalation in the Middle East and concerns about rising bond yields.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?