The Pound Sterling gained on Tuesday following upbeat UK labour market data for the second quarter. The economy created 239,000 jobs, surpassing the prior 134,000 workers hired, despite earlier expectations. The unemployment rate held steady at 4.7%, and there was an unexpected decline in the Claimant Count Change by 6,200.<\/p>\n
Earnings data showed a slight moderation, with average earnings excluding bonuses rising by 5% as expected. Including bonuses, they grew at a slower 4.6% compared to the forecasted 4.7%. The favourable job growth data may support the Bank of England’s gradual approach to monetary policy, following a recent 25 basis point interest rate cut.<\/p>\n
The Pound traded around 1.3440 against the US Dollar, holding above key support levels. The GBP\/USD pair remains above the 20-day Exponential Moving Average at 1.3408. The US Dollar Index traded near a two-day high of 98.50 ahead of US inflation data, expected to show an increase in both headline and core CPI rates.<\/p>\n
Economists predict US headline inflation to rise to 2.8% and core inflation to 3% year-over-year. Market participants await the impact of potential inflationary pressures on Federal Reserve interest rate policy, alongside ongoing US-China trade negotiations and tariff truce extensions.<\/p>\n
We see the strong UK job numbers as a signal that the Bank of England may have to rethink its recent interest rate cut. With 239,000 jobs added, the domestic economy looks more resilient than the Bank’s dovish move would suggest. This fundamentally strengthens our outlook on the Pound Sterling for the coming weeks.<\/p>\n
This jobs report adds to other recent data showing surprising economic robustness. We saw UK CPI for July 2025 tick up to 2.4%, which is above the Bank’s target and puts pressure on them to hold rates steady. Markets are now reflecting this, with overnight index swaps pricing out any further rate cuts from the Bank of England for the remainder of 2025.<\/p>\n
On the other side of the Atlantic, the US inflation data has now been released, and it came in slightly hotter than expected with Core CPI printing at 3.1% year-over-year. This has reinforced the Federal Reserve’s “higher for longer” interest rate policy, giving the US Dollar a boost. The US Dollar Index is now testing the 99.00 level, a high we have not seen since May of this year.<\/p>\n
This creates a classic tug-of-war for derivative traders, with both the UK and US presenting compelling reasons for their currencies to strengthen. We expect this tension in the GBP\/USD pair to increase volatility, making options strategies attractive. The pair’s inability to break decisively above the 1.3500 handle shows the market is uncertain.<\/p>\n
Considering the technical support for GBP\/USD just above 1.3400, we believe buying short-dated call options is a defined-risk way to position for a potential breakout. However, given the dollar’s own strength, purchasing put options with a strike price below 1.3400 offers a good hedge against a hawkish Fed overwhelming the positive UK news.<\/p>\n
Looking back to the spring of 2025, market sentiment was much more bearish on the UK economy, with many expecting a deeper slowdown. This recent turnaround in data has likely caught many positions offside. We must therefore be prepared for sharp movements as these older positions are unwound.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Pound Sterling strengthens as UK job growth beats forecasts; markets eye US inflation, Fed policy signals.<\/p>\n","protected":false},"author":62,"featured_media":17037,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-28878","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/28878","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=28878"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/28878\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17037"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=28878"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=28878"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=28878"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}