The British pound slipped against the euro on Wednesday, with EUR/GBP climbing above 0.88 after the release of weaker-than-expected UK unemployment figures for September.
According to analysts at ING, the currency has struggled to regain ground despite ongoing concerns about the accuracy of the Labour Force Survey data, which was temporarily suspended in 2023 for quality reassessment.
Political risks are also weighing on sentiment, with reports suggesting that Prime Minister Keir Starmer could face a leadership challenge following the upcoming budget later this month.
Although Starmer’s approval ratings remain weak, ING noted that any potential leadership change “could create uncertainty regarding Chancellor Rachel Reeves’ position and potentially add risk to UK asset markets.”
The pound is already under strain from a policy mix of tighter fiscal conditions and a more accommodative monetary stance. ING added that heightened political uncertainty “could push the EUR/GBP exchange rate to new yearly highs in the 0.8870/0.8900 range.”
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