**GBP/USD Decline** GBP/USD is below 1.3400 as the US dollar gains strength due to expectations that the Federal Reserve will keep interest rates steady. The pair traded around 1.3380 during Asian hours on Friday, showing a slight recovery after previous losses. However, it may continue to fall as the USD gains momentum. Recent data from the US Department of Labor shows that Initial Jobless Claims dropped to 198K for the week ending January 10, better than the expected 215K. This decline suggests a stable labor market, despite ongoing high borrowing rates, which boosts the US dollar. Currently, GBP/USD is nearing 1.3370 as strong US data supports a rise in the dollar, overshadowing positive GDP figures from the UK. The pair is currently at 1.3367, reflecting a 0.53% decrease, mainly due to robust US economic indicators outweighing UK economic news. Thursday’s positive sentiment was fueled by the Jobless Claims report, showing a drop to 198K, alongside improvements in manufacturing indexes. The New York Empire State Manufacturing Index rose from -3.7 to 7.7, while the Philadelphia Fed Manufacturing Survey increased by 12.6, exceeding expectations. The author has no positions in the mentioned stocks and is compensated solely by FXStreet. This article does not offer financial advice or personalized recommendations; the information should not be viewed as investment advice. **Market Reaction in 2025** Reflecting on this period in 2025, the market responded positively to strong US labor data that kept the Federal Reserve’s stance steady. Initial jobless claims at 198K, much lower than expected, indicated a strong economy, leading the dollar to outperform the pound. This trend has continued, with the Fed taking a cautious approach through 2025, which supports the dollar. The latest jobless claims for the week ending January 9, 2026, are steady at 210,000, confirming a tight labor market and giving the Fed little reason to cut interest rates from the current 5.25% level. Consequently, the GBP/USD pair has declined over the past year and is now trading near 1.3150, significantly lower than the 1.3380 level in January 2025. The difference in interest rates between the US and the UK remains a key driver for currency traders, as the narrative of a stronger US economy still puts pressure on the pound. **UK Economic Pressures** Attention is now turning to the Bank of England, which faces different economic challenges. UK inflation has decreased to 2.5% in the latest report, leading the markets to predict that the BoE may cut rates before the Fed. This anticipated policy shift is likely to increase downward pressure on the GBP/USD pair in the coming weeks. Given this outlook, buying put options on GBP/USD is a straightforward way to prepare for potential further weakness in the pound. This strategy allows traders to profit if the exchange rate drops below a certain level, while limiting the initial risk to the premium paid for the option. It’s a direct bet on a strong dollar and a potentially weaker pound. Since implied volatility often spikes around central bank meetings, a bear put spread could also be a smart strategy. By selling a lower-strike put against a purchased put, traders can lower the upfront cost of their position. This method caps potential profits, but offers a more capital-efficient way to bet on a moderate decline in GBP/USD. Create your live VT Markets account and start trading now.

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