GBP/USD Extends Gains
On Monday, GBP/USD extended its gains for a second day, benefiting from a decrease in US Dollar strength. The pair reclaimed the 1.3400 level, awaiting the UK’s GDP data that is expected to align with estimates, barring a significant deviation.
The Pound benefits from speculation of Federal Reserve rate cuts, as the US Dollar wanes due to possible government shutdowns. The Bank of England is set to maintain its rates, while the Fed faces projections of nearly two rate cuts.
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UK Q2 GDP Data Confirmed
With GBP/USD holding steady around 1.3440, the immediate focus shifts now that the UK’s Q2 GDP data has been confirmed. The numbers came in slightly ahead of forecasts at 0.4% quarter-over-quarter, providing a solid base for the pound. This beat suggests the UK economy is more resilient than anticipated, which should encourage traders to protect against further sterling strength.
On the other side of the pair, the risk of a US government shutdown is escalating as the funding deadline approaches with no resolution in sight. We’ve seen this before, for instance during the 2018-2019 shutdown, which created significant dollar volatility. This uncertainty makes buying options to protect against sharp, unpredictable moves a prudent strategy for the coming days.
The key driver remains the divergence between central banks, as bets on Federal Reserve rate cuts intensify. Recent US inflation data from August 2025 showed a cooling to 2.5%, while the UK’s CPI remains elevated at 2.9%, reinforcing the expectation that the Bank of England will hold rates firm. This fundamental backdrop supports strategies like buying GBP/USD call options to capitalize on expected upside over the next few weeks.
Focus on US Jobs Report
Attention will now turn squarely to the upcoming US Nonfarm Payrolls report for September. The previous report for August showed a slowdown in job creation to just 150,000, and another weak reading would solidify expectations for a Fed rate cut. Traders should therefore be cautious, as a surprisingly strong jobs number could cause a rapid reversal and unwind the dollar’s recent weakness.
