Sterling slipped against the dollar in Tuesday’s European session, down 0.1% to about 1.3530, after UK labour market data for the three months to June pointed to softer conditions. The move kept GBP/USD on the back foot following Monday’s rejection near 1.3570, with the pair later trading at 1.3522 and testing levels around 1.3520.
The ILO unemployment rate held at 4.9%, defying forecasts for a dip to 4.8%. Employment rose by 83K, compared with a 147K increase in May, while unemployment claims fell by 11K, against expectations for an 11.2K rise, after the prior month’s decline was revised to 6.4K. The release also showed payrolled employment edging lower, with diverging trends across sectors.
Outlook and Trading Recommendations for GBP/USD
We recommend that derivative traders position for continued downward pressure on the GBP/USD pair in the coming weeks. With the UK unemployment rate holding at a disappointing 4.9% and private sector hiring flatlining, the British Pound is losing its upward momentum. Short-term put options or selling GBP/USD futures look like highly viable plays as the currency pair tests key support levels near 1.3520.
Drivers of Sterling Weakness and Volatility Strategies
Our bearish outlook is supported by the widening economic gap between the United Kingdom and the United States. Historically, when UK employment growth slows drastically—as seen with this drop from 147,000 down to just 83,000 jobs—the Bank of England faces mounting pressure to cut interest rates. This contrasts sharply with a resilient US economy, where the US Dollar Index (DXY) has recently pushed past the 103.50 mark, further depressing the pound.
Rising geopolitical tensions in the Middle East are also driving capital into safe-haven assets, which heavily favors the US Dollar over the Pound. Because of this risk-off environment, we expect implied volatility to spike, making options strategies like long straddles highly attractive for traders looking to capture sudden, sharp moves. We advise setting strict stop-loss orders on any remaining long sterling positions, as a sustained break below 1.3520 could quickly open the door to the 1.3450 level.
