UK Jobs Data Boosts Sterling as French Unrest Weakens the Euro | FX Market Update

Key Highlight

• British Pound: UK unemployment unexpectedly declined to 4.7%, its lowest level in over a year. Payroll increased by 13,000, defying expectations of a fall, while wage growth exceeded forecasts. This strengthens expectations of a Bank of England rate rise in November, although upcoming inflation data will be crucial.
• Euro: Escalating protests and thousands of arrests in France have heightened political uncertainty and pushed borrowing costs higher. Concerns over government spending and fiscal stability are weighing on the euro.
• Currency Markets: The euro fell to a three-month low against the Swiss franc as investors sought safer assets. Sterling remained close to its strongest level against the euro in 16 months, supported by stronger UK employment data.
• US Dollar and Canadian Dollar: The dollar softened as US borrowing costs stabilised, with investors awaiting major corporate earnings. Meanwhile, stronger Canadian inflation expectations have led several major banks to anticipate a Bank of Canada rate rise on 28 October.

Market Recap

The latest UK employment figures surprised markets, with falling unemployment and stronger than expected wage growth reinforcing expectations of tighter monetary policy. However, job vacancies dropped below 700,000 for the first time since 2021, indicating that demand for workers is gradually cooling. Public sector wages are also increasing at more than twice the rate of private sector pay.

In Europe, France's growing political tensions have raised concerns about the government's ability to deliver spending cuts and maintain fiscal stability. Investors are demanding higher returns to lend to France, adding further pressure to the euro.

The US dollar weakened slightly as borrowing costs stabilised, while attention turned to upcoming company earnings and key economic releases. In Canada, rising inflation expectations have strengthened the prospect of an interest rate increase later this month.

Market Overview

British Pound: Employment Strengthens Sterling's Position

The UK labour market delivered a stronger performance than expected. Unemployment fell to 4.7%, payrolls increased by 13,000 and wage growth exceeded forecasts. These figures give Bank of England policymakers more reason to consider another interest rate rise in November.

However, the decline in vacancies below 700,000 suggests that the labour market is gradually losing momentum. The next UK inflation figures will therefore be important in determining whether wage pressures are strong enough to justify further monetary tightening.

For businesses and individuals buying or selling pounds, sterling's reaction to inflation data could influence the cost of upcoming international payments.

Euro: French Political Uncertainty Adds Pressure

France's unrest has increased concerns about the government's ability to implement spending cuts and manage public finances. Higher borrowing costs reflect growing investor concerns, contributing to broad weakness in the euro.

The euro's decline against the Swiss franc highlights the shift towards perceived safer currencies during periods of uncertainty. Against Sterling, the euro remains under pressure as stronger UK employment data supports expectations of further Bank of England rate rises.

European Central Bank President Christine Lagarde's upcoming speech on Wednesday is another development for markets to watch, particularly amid reports surrounding the timing of her departure.

US Dollar: Investors Await Fresh Direction

The dollar softened as US borrowing costs stabilised, with investors looking ahead to a busy week of corporate earnings and upcoming economic data.

In the near term, movements in US bond yields and expectations for Federal Reserve policy could influence demand for the dollar. For businesses making international payments, changes in these expectations may create further exchange rate volatility.

What the Latest Moves Mean for Your Currency Transfers

Pound vs Euro (GBP/EUR)

Sterling remains close to a 16-month high against the euro. Stronger UK employment data has reinforced the pound's position, while political uncertainty in France continues to weigh on the single currency.

Markets are also pricing in more Bank of England rate rises than European Central Bank increases over the next six months, providing further potential support for sterling. However, the UK's 28 October Budget remains a significant risk, and the recent rise in GBP/EUR may become harder to sustain at the same pace.

For someone transferring £250,000 into euros, a move back towards the identified support level could mean receiving approximately €2,175 less. Euro sellers would experience the reverse effect. With the exchange rate close to its highest level in 16 months, there is no reliable upside target identified.

Pound vs US Dollar (GBP/USD)

The stronger UK employment figures have reduced some of the near-term downside pressure on sterling, although the outlook for GBP/USD remains cautious. The dollar has a busy period ahead, and upcoming US economic developments could influence the direction of the pair.

Over the medium term, similar interest rate expectations for the Bank of England and Federal Reserve offer sterling little clear advantage. The UK Budget remains an important domestic risk, while a stronger than expected UK inflation reading could provide additional support for the pound.

For a £250,000 transfer into US dollars, a move towards resistance could mean receiving approximately $1,975 more, while a decline towards support could mean receiving approximately $3,775 less. Dollar sellers would experience the reverse effects.

Euro vs US Dollar (EUR/USD)

The euro remains vulnerable to further weakness as French political uncertainty weighs on investor confidence. Although the pair has found some stability against a softer dollar, concerns about France and expectations for US interest rates continue to create downside risks.

Over the medium term, expectations that US interest rates will continue rising into next year, alongside a less aggressive outlook for the European Central Bank, could maintain pressure on the euro. A credible French budget agreement would be a potential positive development, although recent political events have made a resolution appear more difficult.

For a €250,000 transfer into US dollars, a recovery towards resistance could mean receiving approximately $1,725 more, while a decline towards support could mean receiving approximately $2,025 less. Dollar sellers would experience the reverse effects.

Looking Ahead

UK inflation data, developments in France and US market activity are likely to remain key drivers of exchange rates. The Bank of England's November decision and the UK's 28 October Budget could also influence sterling in the coming weeks.

If you are planning an international payment, these developments highlight the importance of monitoring exchange rates and understanding how market movements could affect the amount you ultimately receive.

20th October 2026

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