EUR/GBP holds positive ground near 0.8450 after mixed UK employment data

• EUR/GBP trades in positive territory near 0.8450 in Tuesday’s early European session.
• UK Unemployment Rate climbed to 4.4% in three months to November; Claimant Count Change came in at 0.7K in December.
• The dovish remarks from the ECB could weigh on the shared currency. 

The EUR/GBP cross extends its upside to near 0.8450 during the early European session on Tuesday. The Pound Sterling (GBP) weakens after the UK employment report. Later on Tuesday, traders will keep an eye on Germany’s ZEW Survey for January for fresh impetus. 

Data released by the UK Office for National Statistics on Tuesday showed that the country’s ILO Unemployment Rate ticked higher to 4.4% in the three months to November. This figure missed the expectations of 4.3% during the reported period. Meanwhile, the Claimant Count Change increased by 0.7K in December versus -25.1K (revised from 0.3K) prior, beating the expected 10.3K figure. The GBP remains weak in an immediate reaction to the mixed UK employment report. 

Additionally, an unexpected decline in the UK Retail Sales data has prompted the Bank of England's (BoE) dovish bets, which weigh on the GBP. The UK central bank is widely anticipated to cut the interest rate by 25 bps at its February meeting. The markets have priced in a total of more than 75 basis points (bps) total rate cuts throughout 2025, up from around 65 bps before the data. 

On the other hand, more aggressive market bets on the European Central Bank (ECB) rate cuts could exert some selling pressure on the Euro (EUR). UBS analysts expect at least 150 bps of rate cuts from the ECB over the next 12 months. The ECB policymakers agreed in the December meeting that interest rate cuts should be approached cautiously and gradually, but they also noted that more rate cuts were likely coming given weakening price pressures.