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.

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