The EUR/GBP rose to 0.8711 after a disappointing US jobs report and talks of a possible Bank of England rate cut. In July, the US economy added just 73,000 jobs, and previous months’ figures were revised down by 258,000. This situation has increased fears of “stagflation.” The Nonfarm Payrolls (NFP) number was lower than expected, pushing the unemployment rate up to 4.2%. Meanwhile, in Europe, the Eurozone’s inflation remained stable at 2.4% year-over-year, with core inflation at 2% year-over-year, slightly better than predicted.

UK Manufacturing PMI and BoE Rate Cut

The UK’s Manufacturing PMI fell to 48.0, raising expectations for a 25 basis point interest rate cut by the Bank of England (BoE) next week. The EUR/GBP passed the 20-day Simple Moving Average (SMA) of 0.8661, showing potential for gains towards the year-to-date high of 0.8757 if the positive trend continues. Nonfarm Payrolls influence US monetary policy by reflecting job growth and shaping the Federal Reserve’s interest rate choices. Generally, higher NFP figures strengthen the US Dollar, while lower numbers can negatively impact the currency and gold prices. As of August 2nd, 2025, today’s weak US jobs report has changed the outlook for the coming weeks. The surprisingly low addition of 73,000 jobs in July, combined with downward adjustments, suggests a stalling US economy. This weakens the argument for a strong US Dollar and raises stagflation worries. In the UK, we are now cautious, expecting a Bank of England interest rate cut possibly next week. The Manufacturing PMI’s dip to 48.0 indicates the third month of contraction, a sign that the BoE typically responds to in order to support the economy. Current market data shows that traders estimate an 85% chance for a 25-basis point cut, which would pressure the Pound.

Euro’s Relative Strength

In contrast, the Euro seems to be the strongest of the three currencies, making it appealing. With Eurozone inflation steady and core inflation stable, the European Central Bank shows no signs of cutting rates soon. This difference in monetary policy between a potentially cutting BoE and a stable ECB is a key reason for the strength in the EUR/GBP pair. We think traders should prepare for further EUR/GBP gains, as the pair has broken through important technical levels. Buying call options with a strike price near the year-to-date high of 0.8757 could be a smart way to take advantage of the expected upward trend. The likelihood of a BoE rate cut makes this a strong trade opportunity. The weak US nonfarm payroll data also has wider implications beyond the foreign exchange market. Data from the CME FedWatch tool shows a surge in expectations for a Federal Reserve rate cut before the end of 2025. This weakening dollar and decreasing interest rate expectations could also benefit assets like gold. Create your live VT Markets account and start trading now.

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