November jobs and December CPI data in the UK might slightly increase the value of the pound, continuing a trend from late November. While movements of the pound against the dollar might benefit from a weaker dollar, trades between the euro and the pound could face challenges from events that make traders cautious. The GBP/USD exchange rate could improve, with a possibility of rising above 1.3415/3420 and even reaching 1.3450/3460, thanks to the current weakness of the dollar. However, the pound often struggles during times of risk aversion, which presents several factors to think about in the market.

UK Economic Patterns 2025 Retrospective

Looking back at the trends of 2025, we see that strong UK data could trigger a short squeeze in the pound. A similar situation seems to be starting now as we enter 2026. Upcoming data on inflation and jobs may give the pound a small boost. Last week’s UK inflation data for December showed a rate of 2.3%, higher than expected. This figure remains above the Bank of England’s 2% target, indicating that interest rates may not drop as quickly as thought. This strengthens the argument for supporting the pound. This follows a strong jobs report from last month, showing November’s wage growth stable at around 4.5%. Recent figures indicate that many traders are still betting against the pound, creating perfect conditions for a squeeze. Those who have short positions on sterling might have to buy it back. For derivative traders, this suggests looking at call options on GBP/USD to take advantage of potential gains. If the price breaks above the recent resistance at 1.2900, it could head towards 1.3050 in the next few weeks. Stronger movement would occur if the US dollar remains weak.

Trading Strategies Without Punctuation

On the other hand, the EUR/GBP cross appears vulnerable to the pound’s strength. Consider using put options on EUR/GBP or selling futures as strategies. We might see a move down to test the 0.8500 support level if UK data continues to outperform Eurozone numbers. We must remember that the pound is sensitive to global risk sentiment, a trend we also noticed in 2025. Any unexpected geopolitical tensions or a sharp drop in equity markets could quickly reverse these gains. Thus, using stop-loss orders on any long positions in sterling is a wise strategy. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now