GBP/USD has fallen below 1.3450 after the Nonfarm Payrolls report. This report revealed weak job growth but a drop in the unemployment rate, suggesting a steady labor market. As a result, the markets reduced the chances of a Federal Reserve interest rate cut in January, which helped support the US Dollar, despite disappointing housing data. According to the US Bureau of Labor Statistics, 50,000 jobs were added, falling short of the expected 60,000. However, the unemployment rate improved to 4.4%, exceeding forecasts. This outcome aligns with the Federal Reserve’s view on the labor market and dropped the likelihood of a January rate cut from 29% to just 5%, according to Prime Market Terminal data.

US Housing Statistics Show Decrease

In October, US housing data showed a decline. Building permits fell 0.2% to 1.412 million, and housing starts decreased by 4.6% to 1.246 million. On a positive note, the University of Michigan’s Consumer Sentiment for January was better than expected, showing improved consumer outlook. Next week, we expect key UK economic data, including retail sales, jobs, and GDP figures. Currently, the GBP/USD exchange rate is settling lower, with possible support levels at the 200-day SMA of 1.3384 and the 50-day SMA of 1.3288. If it closes below these levels, it may continue to decline towards 1.3200. The jobs report has changed the market’s perspective, now focusing on the strength of the US labor market. The chances of a January rate cut, as indicated by Fed Funds futures, have collapsed from nearly 30% to single digits in just one day. This shift supports the US Dollar and adds pressure on the GBP/USD pair. The drop in the unemployment rate to 4.4% is being viewed as the main takeaway, overshadowing the weaker housing data. This tendency to prioritize strong employment figures over softer data has been seen repeatedly in the latter half of 2025. It suggests that the Federal Reserve may be comfortable maintaining its current stance for an extended period.

UK Data Releases Anticipated

With less uncertainty regarding the Fed’s next steps, we should shift our focus to essential UK data releases next week. We anticipate a rise in one-week implied volatility for GBP/USD, possibly exceeding the 8.0% levels observed during similar periods last year. This makes options strategies particularly useful for managing potential risks ahead. Considering the ongoing downtrend towards the 1.3384 level, buying put options could be a straightforward way to prepare for further declines. Acquiring February puts with a strike around 1.3350 is one method to gain if the pair breaks that significant moving average. This strategy carries defined risk, limited to the premium paid for the option. However, we should approach the upcoming UK retail sales and GDP figures cautiously. A bear put spread—such as buying a 1.3400 put and selling a 1.3250 put—might be a more measured strategy. This would reduce the upfront cost while still allowing for potential profits if the market moves down. It’s important to remember that a stronger-than-expected UK inflation report in the third quarter of 2025 led to a rapid response from the Bank of England and a sharp increase in the pound. This event illustrated the risks of overlooking the Sterling side. Therefore, we should manage any short positions carefully as we await UK data releases. Create your live VT Markets account and start trading now.

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