By Noam Bennaiche
It is a busy week for UK and Eurozone economic data releases. Yesterday’s UK jobs report and this morning’s inflation figures will both play an important role in the Bank of England’s interest rate decision on 30 July. Markets are also watching for any new developments in Iran, as well as the ECB meeting on 23 July and the Federal Reserve meeting on 29 July.
UK labour market data came in weaker than expected, supporting the case for the Bank of England to keep interest rates unchanged. Average earnings, including bonuses, rose 4.3% compared with a year earlier in the three months to May, down from 4.4% previously. Payrolled employment was little changed from the previous month. Unemployment came in as expected, unchanged from the previous reading at 4.9%. Following the data, Sterling weakened, with GBP/USD falling 0.35% from the previous session. Sterling also fell 0.4% against the single currency yesterday.
Sterling remains particularly sensitive to this week’s data because the Bank of England’s decision end of this month is expected to be a close one. At its June meeting, the Monetary Policy Committee voted 7–2, with two members already supporting a rate increase to 4.00% from the current 3.75%.
This morning’s inflation data further strengthened expectations that the Bank will leave rates unchanged. UK inflation slowed more than expected to 2.6% in June, down from 2.8% in May and reaching its lowest level since March 2025. Following the release, GBP/EUR slipped, highlighting that Sterling is unlikely to find a clear direction until both central banks announce their decisions.
The Euro remains steady ahead of the ECB meeting tomorrow. Investors are focused on whether the ECB will raise rates again or pause following June’s increase. Markets still expect around two further rate rises before the end of the year, supported by higher oil prices, with the first potentially coming in September.
The US Dollar is also lacking clear direction. After falling 0.4% following yesterday’s wage data, GBP/USD has been slowly recovering this morning. The pair is being pulled in different directions by softer UK inflation, higher energy prices, and the upcoming Federal Reserve and Bank of England meetings. The next two days will bring a wave of key economic data releases that are likely to shape market sentiment.
If you are planning an international payment, speak to one of our experts about fixing an exchange rate to protect against market movements and to help your money go further.
Key Events
Thursday, 23rd July
- EUR – ECB rate decision at 1:15pm
- USD – Unemployment Claims at 13:30
- EUR – ECB Press Conference 13:45
- EUR – Consumer confidence
Friday, 24th July
- GBP – Retail Sales
- EUR – German and French PMI (flash manufacturing and flash services) at 8:15am
- GBP – United Kingdom PMI (flash manufacturing and flash services) at 9:30am
- USD – USA PMI (flash manufacturing and flash services) at 2:45pm
Key dates ahead:
- ECB 23rd July
- Fed 29th July
- BoE 30th July