GBP/USD rose in the North American session on Wednesday but later gave up part of its move after a stronger-than-expected US jobs report reduced expectations of Federal Reserve rate cuts.
The pair pulled back from a daily high of 1.3712 and was trading at 1.3655 at the time of writing, up 0.10%.
Us Jobs Report Shifts Rate Cut Odds
We’re seeing a clear shift after the blowout US Non-Farm Payrolls report, which showed a gain of over 350,000 jobs against an expected 180,000. This unexpected strength has significantly altered expectations for a Federal Reserve interest rate cut in March. Consequently, the probability of a cut priced by the markets has plummeted from over 70% to now below 40%.
This sudden reversal suggests volatility in GBP/USD is likely to increase in the coming weeks. The high of 1.3712 now forms a strong technical resistance level that will be difficult to breach. We believe selling out-of-the-money call options with strike prices above 1.3725 could be a prudent strategy to collect premium from capped upside potential.
This dollar strength is contrasted by recent UK inflation data, which last week came in below forecasts at 2.1%. This divergence in economic outlooks strengthens the case for a weaker Pound relative to the Dollar. Therefore, traders might also consider buying put options to directly profit from a potential downturn toward the 1.3500 level.
We are reminded of a similar dynamic we observed in the third quarter of 2025. Back then, a series of robust US data releases consistently pushed back rate cut expectations and placed a firm ceiling on GBP/USD rallies. History suggests that this strong US data trend, if it continues, could suppress the pound for an entire quarter.
