GBP/USD rose in the North American session on Wednesday but pulled back from 1.3712 after US Nonfarm Payrolls data. The pair was near 1.3655, up 0.10%.
January payrolls rose by 130K versus a 70K forecast, while December was revised down to 48K from 50K. The unemployment rate fell to 4.3% from 4.4%, and the University of Michigan survey reported rising household concern about job prospects.
Fed Pricing Shifts After Jobs Data
The BLS said job creation in the 12 months through March 2025 was lower than earlier estimates. Money markets moved from pricing a 100% chance of a Fed cut in June 2026 to 68%, while March pricing showed a 95% probability of no change, per Prime Market Terminal.
In the UK, Labour Party unrest has added pressure on Prime Minister Keir Starmer, who rejected calls to resign. The Bank of England’s 5-4 vote to keep rates unchanged increased expectations of a March cut.
Markets await UK GDP on Thursday, with forecasts for slower Q4 growth, and US CPI on Friday. Technically, GBP/USD traded around 1.3664; support is near the 50-day SMA around 1.3500, with resistance near 1.3700.
This stronger-than-expected US jobs report dramatically changes our short-term view on Federal Reserve policy. We saw a similar dynamic back in early 2024, when a surprisingly strong NFP report of +353K forced markets to rapidly push back the timeline for expected rate cuts. Consequently, we are reducing exposure to long GBP/USD positions ahead of this Friday’s critical US inflation data.
Strategy Ideas Into Key Data
We now face a clear policy divergence, with the Bank of England signaling potential rate cuts as soon as March following last week’s narrow 5-4 vote to hold. Adding to this pound weakness is the political pressure on the Prime Minister, which historically injects volatility and weighs on the currency. This growing gap between the Fed and BoE outlooks creates a compelling case for bearish strategies on the pound.
Given the high-impact data this week with UK GDP and US CPI, we anticipate a sharp increase in volatility. Buying GBP/USD put options is a direct way to position for a move lower, especially if US inflation comes in hot. A daily close below the 50-day moving average around 1.3500 would be our trigger to add to these bearish positions.
For those less certain on direction but confident in a large price swing, options straddles or strangles are attractive. These strategies would profit from a significant move in either direction following the data releases. Such a strategy isolates the trade to benefit from the expected spike in volatility itself, regardless of whether it’s the UK’s growth figures or America’s inflation that provides the bigger shock.
