GBP/USD fell further after UK jobs figures pointed to a faster weakening labour market. UK unemployment rose to 5.2% in Q4, average earnings eased to 4.2%, and the claimant count rose by 28.6K in January.
Regular private sector wage growth, a Bank of England focus, dropped to 3.4%, the lowest in five years. Markets now price a 25-basis-point BoE cut by April, with a 76% chance of a move in March, while UK CPI, PPI inflation, and Retail Price Index data missed forecasts.
Technical Levels And Near Term Direction
On Wednesday the pair dropped 0.5%, extending a slide from January’s four-year highs. Price tested levels below the 50-day EMA, with the 200-day EMA near 1.3435; a break below 1.3490 points to 1.3400, while a move back above the 50-day EMA at 1.3529 would reduce downside pressure.
US Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey are due Thursday, along with several Federal Reserve speakers. UK Retail Sales and PMI data follow on Friday.
The pound dates to 886 AD and is the UK’s currency. In 2022 it made up 12% of FX trades, averaging $630 billion a day; GBP/USD accounts for 11%, GBP/JPY 3%, and EUR/GBP 2%, with BoE policy guided by an inflation aim of around 2%.
Looking back to early 2025, we saw a weakening UK labour market that correctly signaled the start of the Bank of England’s easing cycle. The rise in unemployment to 5.2% and slowing wage growth had markets fully pricing in rate cuts, which began that spring. This bearish outlook for Sterling was the prevailing view at the time.
How The Macro Backdrop Has Changed
The picture today, in February 2026, has shifted considerably. Recent data shows UK unemployment has improved to 4.8%, and January’s wage growth figures came in stronger than expected at 4.9%. With inflation proving sticky at 2.8%, well above the BoE’s target, the case for further deep rate cuts is diminishing.
On the other side of the pair, the US economy is showing resilience, with initial jobless claims holding near 205,000 and last month’s retail sales beating expectations. This strength suggests the Federal Reserve may hold rates higher for longer compared to the Bank of England. This policy divergence could continue to put a cap on any significant Pound rallies.
For derivative traders, this environment suggests leaning towards strategies that benefit from a range-bound or slightly weaker Pound Sterling. We believe buying GBP/USD puts with expirations in the next one to two months offers a clear way to position for potential downside if UK data disappoints. Alternatively, bearish put spreads could be used to lower the upfront cost while targeting a specific downward move.
While we saw the pair break below key moving averages like the 200-day EMA back in 2025, it has since recovered. Currently, the 1.3600 level is acting as initial support, with the more significant psychological level at 1.3500 below that. Any rallies are likely to face resistance near the recent highs around 1.3780.
