The GBP/USD pair is steady at around 1.3465 during early European trading. Traders are cautious as they await important US economic data, including the weekly Initial Jobless Claims and the Nonfarm Payrolls (NFP) report. December’s job data is expected to shed light on future interest rate changes. The NFP is predicted to rise by 60,000, while the Unemployment Rate might drop to 4.5% from 4.6% in November. If the results are better than expected, they could influence the US Federal Reserve’s decisions, potentially strengthening the USD against the GBP.

The GBP/USD Consolidation

The GBP/USD is stabilizing above the mid-1.3400s during Thursday’s Asian session, following a recent peak near 1.3570. A decline in global risk sentiment has created a balance with mixed US economic data, allowing the USD to retain its weekly gains and limiting the GBP/USD’s rise. Reports show that US services sector activity unexpectedly increased in December, with the Non-Manufacturing PMI rising to 54.4. Meanwhile, the ADP national employment report pointed to a smaller-than-expected rebound in private payrolls. As a result, the GBP/USD is trading at 1.3486, with the US Dollar gaining strength from positive employment figures and a slight risk-off market sentiment. In early 2025, GBP/USD was also hovering around 1.34, waiting for US job data to guide the Federal Reserve’s direction. The market was tense then, with the VIX volatility index indicating hedging against potential downturns. Everyone was curious whether a weak jobs report would lead the Fed to consider easing its policy. Now, in January 2026, we face similar uncertainty but with more defined positions from central banks. The recent US Nonfarm Payrolls report for December 2025 showed a strong gain of 199,000 jobs, reinforcing the Federal Reserve’s wait-and-see approach regarding rate cuts. This has bolstered the dollar and restricted significant gains for the pound.

Market Volatility and Strategies

As a result, implied volatility in GBP/USD options is rising as traders anticipate a possible breakout from the current range. We recommend buying options like straddles to prepare for a big move after the upcoming inflation data, without risking a directional bet. This strategy protects against the chance of a surprise from central banks. Additionally, the Bank of England faces pressure from UK inflation, which remains stubbornly high, last reported at 3.9% for the year ending November 2025. This compels them to keep interest rates high, which supports Sterling and creates a tight competition between currencies. Consequently, range-bound strategies may be fruitful in the short term. In the coming weeks, we should closely watch the release of both US and UK inflation figures. A higher-than-expected US CPI could strengthen the dollar, pushing GBP/USD lower, while a surprising drop in UK inflation might give the Bank of England the opportunity to signal potential easing, leading to similar downward pressure. We need to be ready to act based on whichever data provides a clearer direction. Create your live VT Markets account and start trading now.

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