The EUR/GBP rose to 0.8711 following a disappointing US jobs report and talks of a possible Bank of England (BoE) rate cut. In July, the US economy added just 73,000 jobs, and previous months’ numbers were revised down by 258,000, raising concerns about stagflation. The Nonfarm Payrolls (NFP) number fell short of expectations, pushing the unemployment rate up to 4.2%. Meanwhile, in Europe, the Eurozone’s inflation remained steady at 2.4% year-over-year, with core inflation at 2%, slightly beating forecasts.

UK Manufacturing PMI And BoE Rate Cut

The UK’s Manufacturing PMI dropped to 48.0, leading to increased speculation about a 25-basis point rate cut by the BoE next week. The EUR/GBP has risen above the 20-day Simple Moving Average (SMA) at 0.8661, with potential to reach the yearly high of 0.8757 if this momentum persists. The NFP figures affect US monetary policy by showing employment trends that influence the Federal Reserve’s interest rate decisions. Generally, higher NFP numbers strengthen the US Dollar, while lower figures can harm both the currency and gold prices. Looking at data from August 2, 2025, the disappointing US jobs report has changed the outlook for the coming weeks drastically. The shockingly low addition of 73,000 jobs in July, alongside downward revisions, signals a slowing US economy. This weakens the case for a robust US Dollar and raises stagflation worries. In the UK, we are now monitoring the possibility of a BoE interest rate cut as soon as next week. The PMI drop to 48.0 indicates three months of contraction, a key signal that the BoE often responds to in order to support the economy. Current market data suggests an 85% chance of a 25-basis point cut, which could negatively impact the Pound.

Euro’s Relative Strength

In contrast, the Euro is showing strength compared to the other currencies, making it an appealing asset. With stable Eurozone inflation and steady core inflation, the European Central Bank does not seem likely to cut rates soon. This policy gap between a potentially cutting BoE and a steady ECB explains why the EUR/GBP pair is strengthening. We advise derivative traders to prepare for more upside in EUR/GBP, as the pair has broken through important technical levels. Buying call options with a strike price near the yearly high of 0.8757 could be a smart move to take advantage of this expected trend. The growing certainty of a BoE rate cut makes this a high-confidence strategy. The weak US nonfarm payrolls data also impacts markets beyond just foreign exchange. The CME FedWatch tool indicates a sharp rise in expectations for a Federal Reserve rate cut before the end of 2025. This scenario of a weakening dollar and falling interest rate expectations could favor assets like gold. Create your live VT Markets account and start trading now.

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