Euro pulls back against a stronger Pound following upbeat UK employment data

The Euro (EUR) posts moderate losses against the British Pound (GBP) on Tuesday, yet trading within recent ranges. The EUR/GBP pair has pulled back below 0.8500, from highs around 0.8515 on Friday, weighed by growing geopolitical tensions and surging Oil prices, while in the UK, employment figures have provided some support to the Pound.

The UK ILO Unemployment Rate remained steady at 4.9% in the three months before May, against expectations of an increase to 5%. Besides, unemployment claimants rose by 6.7K, well below the 28.3K forecast by market analysts, while April's Claimant Count Change was revised down to 1.3K from previous estimates of 31.2 K. The impact of these data on the Pound, however, has been moderate so far.

Burnham pledges some flexibility on fiscal rules

On Monday, Andrew Burnham was nominated Prime Minister and, once again, reiterated that he will stick to the fiscal rules set by the previous cabinet. Burnham, however, flagged some flexibility within the rules to achieve a set of measures to alleviate the cost of living, which was enough to send shivers through Pound crosses.

Meanwhile, geopolitical uncertainty keeps weighing on sentiment, and acting as a headwind for Euro rallies. The US military hit targets in Iran for the 10th day, and the Tehran-backed Houthis announced a blockade of Saudi Arabian Oil exports, a move that might increase concerns about a supply Shortage

Crude prices, however, have ticked lower from the six -week highs hit on Monday as reports that mediators have delivered a proposal for a 10-day ceasefire to Iranian authorities have offered a glimpse of hope for some de-escalation.

In Europe, later on the day, the ZEW Economic Sentiment Survey will provide some fundamental guidance for the common currency, although the highlight of the week is the European Central Bank’s (ECB) Monetary Policy decision on Thursday. The bank is widely expected to leave rates on hold, but investors will be eager to assess the chances of another 25 basis points rate hike in September.