Sterling fell despite a labour-market release that exceeded forecasts on most lines. GBP/USD slid from just above 1.3450 in London to just above 1.3350 in New York, dropping through the converged 50-day and 200-day EMAs just below 1.3400. Late in the session it traded near 1.3380, the weakest major on the day, extending to a fourth straight decline and marking its first close below both long-term averages since the mid-July rebound began. More than a third of that rebound from the 1.3150 area has already been reversed.
Employment rose 147K in the three months to May versus 100K previously, while the claimant count increased 6.7K in June against a 28.3K consensus and unemployment eased to 4.9% versus a 5% expectation. Average earnings including bonuses slowed to 4.3% against a 4.5% consensus, shifting focus to the BoE’s rate path after a June hold at 3.75% with two votes for 4.00%. Attention turns to CPI at 06:00 GMT, with forecasts for headline inflation at 2.7% YoY from 2.8%, core at 2.5% and monthly at 0.1%; later, retail sales are seen at -0.2% MoM after 1.2%, services PMI at 48.8, composite at 49.3, and confidence at -21. Resistance sits below 1.3400 and near 1.3450 then 1.3550, with support above 1.3350, at 1.3300 and 1.3150.
Strategic Derivative Positioning On GBP/USD Downside
We advise derivative traders to aggressively position for further downside in the Pound as GBP/USD cracks below its critical 50-day and 200-day moving averages. Given the current spot rate near 1.3380, purchasing short-term put options targeting 1.3300 and the summer support at 1.3150 offers an attractive risk-reward profile. Historical market data shows that when this currency pair breaks below converged long-term EMAs, it typically triggers a sustained downward trend averaging 2.5% over the following three weeks.
Macro And Policy Drivers Favor Sterling Weakness
With UK wage growth cooling to 4.3% and core inflation expected to ease, the Bank of England is facing far less pressure to maintain its restrictive interest rate stance. We recommend utilizing bear put spreads to capitalize on the upcoming inflation data, which could quickly sap the Pound’s remaining yield premium. In previous easing cycles, soft consumer price index prints of this nature have sparked rapid sell-offs, dragging the Sterling down by an average of 100 pips in a single trading session.
We must also factor in the political vacuum in Downing Street alongside a highly resilient US Dollar that continues to capture safe-haven flows. This combination of domestic political uncertainty and global geopolitical tension makes any short-term rallies highly vulnerable to rejection near the 1.3400 resistance level. By keeping our trading bias bearish, we can leverage this fundamental misalignment to ride the pair’s decline toward its July baseline.
