EUR/GBP is testing ING’s 0.8570/80 zone as softer UK jobs and wage pressures reinforce the case for Bank of England caution.
The Euro to Pound (EUR/GBP) exchange rate climbed to around 0.8569 on Wednesday, putting ING’s near-term 0.8570/80 objective almost within touching distance.
Pound Sterling’s problem is not a sudden deterioration in the UK economy.
It is a labour market that keeps cooling without giving the Bank of England much reason to respond with higher rates.
ING’s James Smith described the latest employment figures as “nothing particularly earth-shattering”, but the detail was softer.
“Payrolled employment is down a touch,” Smith said, while consumer-services employment is falling at an increasing pace and “the remaining private sector… is flatlining.”
Private-sector wage growth is also running below 3%, despite a slightly firmer latest monthly reading.
The conclusion from ING is fairly straightforward: “the jobs market remains cool, and wage pressures are fairly minimal. It suggests little impetus for the Bank of England to hike rates this year.”
Official data reinforce that picture. Payrolled employment fell by 86,000 year-on-year in the three months to June, while the provisional July estimate was down 94,000 from a year earlier. Vacancies slipped to 707,000 in May-July.
Lloyds reaches much the same conclusion, highlighting the sustained weakness in payroll employment and the continued decline in vacancies as evidence that hiring demand has cooled materially.
There is still no collapse here.
Unemployment was 4.9% in April-June and the ONS itself cautions against over-interpreting short-term movements. But the direction of travel is hardly hawkish.
Near-Term EUR/GBP Outlook: 0.8570/80 Is Already in View
ING thinks markets are still pricing too much Bank of England tightening.
“The sterling money market curve still prices 60bp of Bank of England hikes into next year,” the bank said. “That should slowly be priced out over the next three to six months.”
That repricing would remove some of Sterling’s yield support and leave EUR/GBP with room to edge higher.
ING’s call is explicit: “EUR/GBP looks biased to the 0.8570/80 area.”
The broader bank consensus also leans modestly higher.
From around 0.8569, the median forecast path reaches roughly 0.8700 by Q2 2027, while the central 50% of forecasts sits between about 0.8600 and 0.8800.
That longer-run picture is hardly a call for a Sterling rout.
In fact, EUR/GBP has already fallen substantially over the past year.
The more immediate question is whether fading BoE hike expectations can push the cross back through 0.8580 and begin to unwind a little more of that Sterling strength.
ING thinks the first part of that move is close.
Our currency coverage draws on live market data, official economic releases and published bank research.
