The Pound gained ground against the Euro on Thursday after new data indicated that the slowdown in the UK labour market, which had previously concerned some policymakers, was not as severe as earlier reports had suggested.

The Euro fell 0.22% against the Pound, trading at 86.52 pence, as the figures eased expectations for rapid interest rate cuts by the Bank of England, thereby boosting Sterling.

The labour market data painted a mixed picture. While annual wage growth slowed to 5.0% in the three months to May, the lowest since Q2 2022, it still came in slightly above the 4.9% median forecast from a Reuters poll of economists.

Meanwhile, a previous estimate of a sharp 109,000 drop in payroll employment for May was significantly revised, showing a much smaller decline of just 25,000 workers.

“Today’s labour market report continues to paint a picture of a loosening jobs market. That said, the labour market picture looks better than it did last month,” stated Sanjay Raja, Deutsche Bank’s chief UK economist.

Taken together with Wednesday’s stronger-than-expected UK inflation figures, the latest labour market data puts the Bank of England in a challenging position, having to navigate the tension between persistent inflation and a labour market that is cooling, though not in freefall.

Yet for 2025, “this takes some of the pressure off the Bank of England to cut rates more quickly,” according to James Smith, developed markets economist, UK, at ING.

In addition to gaining against the Euro, the Pound also strengthened against most other major currencies, including the Yen and Swiss Franc, Reuters reports.

However, it slipped 0.15% against the greenback, trading at $1.1340, as the Dollar rebounded broadly following a selloff on Wednesday.

Also on Wednesday, media reports suggesting that US President Donald Trump was likely to soon dismiss Federal Reserve Chair Jerome Powell triggered a decline in the Dollar.

Although Trump later clarified that he was not currently planning to remove Powell, he left the option open and reiterated his criticism of the Fed chief for not cutting interest rates.