The GBP/USD pair is stable, staying above the mid-1.3300s. It is currently trading around 1.3360, with no signs of a significant drop. The US Dollar has recently risen slightly from a two-month low, leading to cautious trading for GBP/USD. A weaker global risk sentiment is supporting the US Dollar as a safe-haven option. Expectations for a dovish Federal Reserve are limiting sharp moves in the dollar. Although the US labor market shows signs of weakening, leading to possible interest rate cuts, traders are being cautious. This week will see important macroeconomic data such as UK employment figures, US Nonfarm Payrolls, UK inflation reports, and the Bank of England’s interest rate decision. The BoE’s decision on Thursday is key, with expectations set at 3.75%, down from the previous 4%.

Influence Of BoE And US Inflation Data

The BoE’s view on inflation could greatly affect GBP values. Additionally, the US consumer inflation data released Thursday will influence the immediate direction of the GBP/USD pair. Markets are currently awaiting these results for further guidance. As of December 15th, 2025, GBP/USD holds critical support just above the mid-1.3300s. This week’s focus is on the heap of economic data leading up to the Bank of England’s rate decision on Thursday. The anticipation is causing a tense market environment. The main highlight is the Bank of England, expected to cut interest rates from 4% to 3.75%. This change has been anticipated as UK inflation has steadily decreased, reaching 4.1% in November 2025, down from the highs of 2022. Traders should prepare for potential Sterling weakness, as interest rate cuts generally lead to currency declines. However, any decline in the pound is being supported by expectations of a weaker US dollar. With the US unemployment rate rising to 4.2%, markets are considering the possibility of two Federal Reserve rate cuts in 2026. This dovish outlook for the Fed is limiting the dollar’s ability to gain strength and providing some support for the GBP/USD pair.

Potential Trading Strategies In Volatile Markets

With significant events in both the UK and the US this week, implied volatility is expected to rise. This indicates that options strategies, like buying straddles or strangles, could be useful for traders anticipating a strong price movement without knowing the direction. These strategies would benefit from a large breakout after the data releases, whether the pair moves up or down. We are closely monitoring the 200-day Simple Moving Average, which is currently acting as important support. A strong break below this level, especially after the BoE’s announcement, could indicate a new bearish trend and trigger further selling. On the other hand, if this level holds despite a dovish rate cut, it would suggest underlying strength in the pair. In the weeks ahead, attention will be on the differences in policy between the Bank of England and the US Federal Reserve. Traders should consider the guidance both central banks will provide following their announcements. The narrative about future rate paths will likely set the main trend for GBP/USD as we move into early 2026. Create your live VT Markets account and start trading now.

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