• EUR/GBP gains some positive traction on Tuesday, albeit struggles to capitalize on the strength.
• The immediate market reaction to softer UK jobs data fades rather quickly amid a weaker USD.
• The German ZEW survey, Eurozone GDP print fail to impress the Euro bulls or boost to the cross.

The EUR/GBP cross attracts fresh buying on Tuesday and reverses a major part of the previous day's losses, though the intraday uptick runs out of steam near the 0.8715-0.8720 region. Spot prices quickly slide back below the 0.8700 mark during the early European session and remain well within the striking distance of the YTD low touched last Thursday.

The British Pound weakens a bit following the release of the UK employment details and turns out to be a key factor that lends some support to the EUR/GBP cross. In fact, the UK Office for National Statistics (ONS) report that the number of people claiming unemployment-related benefits rose by 46.7K in April as compared to the 26.5K in the previous month and consensus estimates for a fall of 10.8 K. Furthermore, the jobless rate ticked higher to 3.9% from 3.8%, suggesting that the flatlining economy has started to take a toll of Britain’s labour market.

Additional details of the report showed that UK Average Earnings excluding bonuses rose by 6.7% in March, softer than the 6.8% expected, though slightly higher than April's 6.6%. The data, meanwhile, does little to influence expectations about the need for further rate hikes by the Bank of England (BoE) and is largely overshadowed by the emergence of fresh selling around the US Dollar (USD), which benefits the Sterling Pound. This, in turn, is seen as a key factor that keeps a lid on any meaningful upside for the EUR/GBP cross and warrants caution for bulls.

The shared currency's relative underperformance, meanwhile, could be attributed to the disappointing release of the German ZEW Economic Sentiment Index, which deteriorated sharply to -10.7 in May as compared to 4.1 previous and -5.5 expected. Separately, the preliminary estimates showed that the Eurozone economy expanded by 0.1% during the three months to March of 2023, matching the pace registered in the fourth quarter of 2022. The data, however, does little to impress the Euro bulls or provide any impetus to the EUR/GBP cross.

Technical levels to watch