EUR/GBP rose for a second day, reaching around 0.8725 in early European trade after weaker UK jobs data. The UK claimant count increased by 28.6K in January, and the unemployment rate rose to 5.2% in the three months to December.
Average Earnings Excluding Bonus slowed to 4.2% year on year, in line with expectations. Average Earnings Including Bonus eased to 4.2% from 4.6%.
Uk Jobs Data Lifts Eurgbp
These figures suggest softer UK labour market conditions at the start of 2026. They also support expectations of a 25-basis-point Bank of England rate cut in March. This weighed on the pound and helped push EUR/GBP higher.
The euro was little changed after Germany’s final CPI matched the flash estimate, printing 2.1% year on year in January. The data did not shift expectations for European Central Bank policy.
However, talk of a potential ECB rate cut could cap further euro gains. A break above last week’s monthly high near 0.8740 could open a move toward 0.8800, a level last seen in December 2025.
The report was corrected on 17 February at 08:17 GMT, stating the January claimant count was 28.6K, not 28.8K.
Market Pricing And Trade Setup
The rise in UK unemployment to 5.2% points to a cooling economy. It is a notable jump from the 4.5% levels seen just a few months earlier in late 2025. This softer labour market supports our view that the Bank of England may cut rates next month. Overnight swaps now price an 85% chance of a March cut. As a result, sterling is under pressure, which supports a higher EUR/GBP.
We see buying EUR/GBP call options as a straightforward way to take advantage of this move. With spot testing resistance near 0.8740, strikes around 0.8750 or 0.8800 look attractive over the coming weeks. This setup targets a potential move back to levels not seen since December 2025, while keeping downside risk limited.
One-month implied volatility in EUR/GBP has risen from about 7% to above 8.5% since the data release, suggesting the market expects larger swings. The main driver is sterling weakness, but a possible shift in ECB rate expectations is the key risk to the trade. This uncertainty makes options a practical way to manage risk versus taking an outright spot position.
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