GBP/USD stayed under pressure for a second day as the US Dollar edged higher, though the pair held above 1.3600 in early Tuesday trading. Markets are awaiting the UK monthly jobs report for near-term direction.
UK Office for National Statistics data is expected to show a softer labour market at the start of 2026. Jobless claims are forecast at 22.8K in January versus 17.9K previously, while the unemployment rate is seen steady at 5.1% for the three months to December, and wage growth is expected to cool for both regular pay and total earnings.
Market Focus On Uk Jobs Data
Key Near Term UK Catalysts
Attention then turns to UK CPI on Wednesday, as markets price a 25 bps Bank of England rate cut in March. The US Federal Reserve’s FOMC minutes are also due on Wednesday, which may affect expectations for the Fed’s rate path and near-term US Dollar demand.
Later in the week, UK Retail Sales data on Friday and flash PMIs from the UK and US could add volatility. Softer US consumer inflation last Friday increased odds of a June rate cut, and markets are pricing at least two Fed cuts in 2026.
We are seeing the pound struggle to stay above the 1.3600 level against the dollar, a significant shift from the 1.3800 range it held for much of late 2025. The immediate focus is today’s UK jobs report, where another rise in jobless claims could easily break that support. We’ve seen UK unemployment creep up steadily from 4.2% last year to the current 5.1%, so the market is sensitive to any further weakness.
Given the expectation of a soft jobs number, traders should consider buying short-dated GBP/USD put options. A strike price just below the current level, perhaps around 1.3550, would protect against a downturn following the data release. This strategy makes sense as weak employment figures would solidify expectations for a Bank of England rate cut next month.
Volatility Strategy Considerations
Managing Event Risk This Week
This entire week is packed with volatility-inducing events, including UK inflation and the FOMC minutes tomorrow. This makes a simple directional bet risky, so purchasing a strangle option strategy could be effective. By buying both an out-of-the-money put and call option, a trader can profit from a large price swing in either direction, regardless of what the data shows.
Looking further ahead, we must remember that the Federal Reserve is also expected to cut rates this year, with markets pricing in the first move by June. The Fed’s own dot plot from December 2025 pointed toward at least two cuts in 2026, which is limiting the dollar’s strength. This acts as a floor for GBP/USD, suggesting any major dips this week might be short-lived.
