The GBP/USD pair is steady around 1.3500 after a pullback from recent highs. Dovish sentiments from the US Federal Reserve and a lack of US Dollar buying keep the pair in this range as traders await important US economic data. The US Dollar holds onto previous gains but lacks strength due to weak demand for safe-haven assets and soft Fed policies. On the other hand, the British Pound benefits from lower UK budget concerns and a more aggressive Bank of England, which helps support GBP/USD around 1.3500.

Positive Outlook for GBP/USD Bulls

Current conditions are looking good for GBP/USD bulls, with a positive near-term outlook for the pair. However, traders remain cautious as they wait for crucial data, including the US Nonfarm Payrolls, ADP report, ISM Services, and JOLTS Job Openings. The Pound Sterling is the oldest currency in the world and serves as the UK’s official currency, heavily influenced by decisions made by the Bank of England. Economic indicators like GDP and trade balance significantly impact the Pound’s value—strong economic performance or a positive trade balance typically boosts the currency. The Pound is also sensitive to global economic trends and the BoE’s monetary policies. Currently, the GBP/USD pair is stable around the 1.3500 level, buoyed by the expectation that the Bank of England will be slower to cut interest rates compared to the US Federal Reserve. This difference in policy has been a major factor in the Pound’s strength against the Dollar, with an upward trend seen as more likely for now. In December 2025, UK inflation remained stubborn at 2.9%, above the Bank of England’s target. In contrast, the US Fed’s preferred inflation measure showed a cooling trend in late 2025, ending at about 2.5%. This divergence indicates the BoE may have less flexibility to cut rates.

Strategy for US Nonfarm Payrolls Report

As the pair consolidates, implied volatility is expected to rise ahead of this Friday’s US Nonfarm Payrolls report. A potential strategy is to buy call options on GBP/USD, which would allow for potential gains if US data falls short while limiting downside risk. This positions traders for a likely upward trend without full exposure to unexpected job numbers. Given the uncertain nature of the upcoming data, another strategy could be a long straddle, involving the purchase of both a call and a put option. This approach profits from significant price movements, whether the US jobs report is unexpectedly strong or weak. A similar period of consolidation occurred in the third quarter of 2025 before the Fed’s September meeting. After that meeting hinted at a softer stance, the Dollar weakened significantly, leading to a sharp increase in GBP/USD. The current situation before the NFP report feels very reminiscent, suggesting a sharp move is more probable than continued stability. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now