The Pound Sterling dropped sharply against major currencies after reports indicated that the UK job market is worsening as of September. The Office for National Statistics reported a net loss of 22,000 jobs, a stark decrease from the 91,000 job gain noted in August. This is the first decline in employment since March 2024.

Unemployment Rate Shift

The UK’s ILO Unemployment Rate rose to 5%, up from 4.9% previously and higher than the prior 4.8%. This is the highest rate since March 2021. As a result, there are growing expectations that the Bank of England may decide to cut interest rates at its December meeting. Average Hourly Earnings, excluding bonuses, increased by 4.6% annually, which met expectations but was slightly below the 4.7% recorded in August. When bonuses are included, earnings rose by 4.8%, which was also slower than expected. The Pound fell to around 1.3120 against the US Dollar, breaking a four-day winning streak due to the weak UK employment figures. In contrast, the US Dollar remained stable, aided by the Senate advancing a government funding bill. Attention is on the Federal Reserve’s interest rate decisions, with a 62.4% chance of a rate cut in December. Upcoming UK GDP data for the third quarter, expected to show a 0.2% growth, could also impact the GBP/USD trading pair. Considering the sharp drop in the Pound Sterling on November 11, 2025, we can predict further weakness in the weeks ahead. The latest labour market data clearly indicates a slowing economy, marked by job losses for the first time since March 2024. This situation strengthens the case for a potential interest rate cut by the Bank of England next month.

Monetary Policy Outlook

The rising unemployment rate, now at a four-year high of 5.0%, raises significant concerns and adds weight to the discussion around easing monetary policy. Recent data, including last week’s October retail sales, which showed a 0.5% contraction, confirms that consumer activity is declining. Slower wage growth further eases inflation pressure, giving the Bank of England more reasons to lower borrowing costs. Furthermore, the Bank of England’s recent shift in policy guidance—removing the word “careful” from its statement—signals a notable change in tone. This marks a significant shift from the aggressive rate hikes seen in 2023 and early 2024, which were aimed at tackling post-pandemic inflation. We should prepare for the onset of a new easing cycle, possibly looking at derivatives like buying GBP put options to benefit from a potential decline. Looking ahead, Thursday’s UK GDP data will be a key indicator and is expected to confirm slower economic growth. With the GBP/USD pair already trading below its 200-day moving average, the trend appears bearish, suggesting we could see a test of April’s lows around 1.2700. Selling GBP/USD futures or creating bearish option spreads are effective strategies in this market. While the US Fed is also contemplating a rate cut, the UK’s economic data is deteriorating more quickly. The most recent US inflation report indicated that core prices are more stable than in the UK, suggesting that the Fed may take a more patient approach than the Bank of England. This difference in economic momentum makes shorting the Pound against the US Dollar an attractive option. Create your live VT Markets account and start trading now.

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