The GBP/USD exchange rate rose as traders dismissed strong US labor data and continued to expect a rate cut from the Federal Reserve (Fed). US labor reports showed mixed results, with decreasing jobless claims but rising layoffs, indicating a slowdown. Following the Autumn Budget, the Pound stayed steady, as economists anticipate no obstacles to the Bank of England’s potential rate cut in December. As of now, the GBP/USD rate is at 1.3367, reflecting a 0.12% increase. Initial US unemployment claims were lower than expected at 191,000 compared to the predicted 220,000. Continuing claims slightly dipped to 1.939 million. Even with a rise in layoffs to 71,321 in November, the market still sees an 85% chance of a Fed rate cut this December.

British Pound Strengthens Against Major Currencies

The British Pound has gained against major currencies, particularly the US Dollar. It crossed its 100-day Simple Moving Average at 1.3369, targeting 1.3400. A close above this mark could lead to additional gains, while falling below key averages might drop the rate to 1.3266. The swaps market suggests a 90% chance of a Bank of England rate cut this month. Today, December 4, 2025, there’s a strong focus on potential rate cuts from both the Fed and the Bank of England. Despite some solid US labor data, the market is betting heavily on easing, with the CME FedWatch Tool showing a 92% chance of a Fed cut next week. This strong belief continues to push the GBP/USD pair higher. The recent November Core PCE inflation rate of 2.8% year-over-year supports the Fed’s actions. This marks the fourth month of slowing price pressures, allowing officials to ease policies without worrying about rising inflation. This disinflation trend is seen as more significant than the mixed employment numbers. In the UK, the likelihood of a December rate cut seems clear after the latest Monetary Policy Report revised its 2026 inflation forecast down to 2.1%. The Pound is gaining strength as the Bank of England’s cut is viewed as a support for the economy without causing new inflation fears. This contrasts with the US, where a rate cut is seen mainly as a response to a slowing economy.

Market Strategies Ahead of Central Bank Meetings

In the coming weeks, we should consider strategies that take advantage of the current mood but protect against surprises. Since so much easing is already factored in, implied volatility for both GBP and USD options is high ahead of next week’s central bank meetings. Selling out-of-the-money puts on GBP/USD could be a good option to earn premium while the uptrend persists. However, we need to be cautious about a possible “sell the fact” reaction after the cuts are officially announced. A similar situation happened in March 2025 when the dollar initially dropped after an expected cut but then recovered as traders took profits. This indicates that holding long GBP/USD positions through the announcement could be risky. We’re closely watching the 1.3400 level in GBP/USD as a key benchmark for buyers. A solid close above this psychological barrier might pave the way to 1.3500 before the year ends. On the other hand, failing to stay above the 200-day moving average at 1.3322 could indicate that upward momentum is fading. Create your live VT Markets account and start trading now.

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