The EUR/GBP climbed to 0.8711 after a poor US jobs report and discussions about a potential BoE rate cut. The US economy added only 73,000 jobs in July, with previous months’ data revised down by 258,000, fuelling concerns about a “stagflation” scenario.
The Nonfarm Payrolls figure was lower than forecasts, increasing the unemployment rate to 4.2%. In Europe, the Eurozone’s inflation was stable at 2.4% YoY, with core inflation at 2% YoY, slightly better than predictions.
UK Manufacturing PMI And BoE Rate Cut
UK’s Manufacturing PMI dropped to 48.0, raising expectations of a BoE interest rate cut by 25 basis points next week. The EUR/GBP surpassed the 20-day SMA at 0.8661, with potential gains towards the YTD high of 0.8757 if the upward momentum continues.
Nonfarm Payrolls impact US monetary policy by indicating employment levels and influencing Federal Reserve’s interest rate decisions. Generally, higher NFP figures benefit the US Dollar, while lower ones can affect the currency and gold prices negatively.
Based on today’s data from August 2nd, 2025, the weak US jobs report has significantly altered the outlook for the coming weeks. The shockingly low 73,000 jobs added in July, combined with downward revisions, points to a stalling US economy. This immediately weakens the case for a strong US Dollar and brings stagflation concerns to the forefront of our strategy.
In the United Kingdom, we are now watching for a Bank of England interest rate cut as early as next week. The drop in the Manufacturing PMI to 48.0 marks the third consecutive month of contraction, a signal the BoE has historically acted upon to support the economy. Market data from overnight swaps now shows that traders are pricing in an 85% probability of a 25-basis point cut, which would weigh heavily on the Pound.
Euro’s Relative Strength
The Euro, by contrast, appears to be the strongest of the three currencies, making it an attractive asset. With Eurozone inflation stable and core inflation holding firm, the European Central Bank has given no indication it plans to lower rates soon. This policy divergence between a potentially cutting BoE and a steady ECB is the central reason we see strength in the EUR/GBP pair.
We believe derivative traders should respond by positioning for further EUR/GBP upside, as the pair has now broken above key technical levels. Buying call options with a strike price near the year-to-date high of 0.8757 could be an effective way to capitalize on the expected momentum. The increased certainty of a BoE rate cut makes this a high-conviction trade for our purposes.
The weak US nonfarm payrolls data also has broader implications beyond just the foreign exchange market. Data from the CME FedWatch tool now shows a sharp increase in bets on a Federal Reserve rate cut before the end of 2025. This environment of a weakening dollar and falling interest rate expectations could also be supportive for assets like gold.
