GBP/USD rose during Wednesday’s North American session but fell back from 1.3712 after the US Nonfarm Payrolls (NFP) report. The pair was near 1.3655, up 0.10%.
January payrolls increased by 130K versus a 70K forecast. December was revised down to 48K from 50K. The unemployment rate fell to 4.3% from 4.4%. The University of Michigan survey also showed households are more worried about job prospects.
Fed Pricing Shifts After Jobs Data
The BLS said job gains in the 12 months through March 2025 were lower than previously estimated. After the data, money markets reduced the odds of a Fed cut in June 2026 from 100% to 68%. Markets also priced a 95% chance of no change in March, according to Prime Market Terminal.
In the UK, unrest within the Labour Party has increased pressure on Prime Minister Keir Starmer, who rejected calls to resign. The Bank of England’s 5–4 vote to hold rates steady also raised expectations of a rate cut in March.
Markets are watching UK GDP on Thursday, with forecasts pointing to slower Q4 growth, and US CPI on Friday. From a technical view, GBP/USD traded around 1.3664. Support sits near the 50-day SMA around 1.3500, while resistance is near 1.3700.
This stronger-than-expected US jobs report changes our near-term view of Federal Reserve policy. We saw something similar in early 2024, when a surprise NFP gain of +353K forced markets to delay expected rate cuts. As a result, we are reducing exposure to long GBP/USD positions ahead of Friday’s key US inflation report.
Strategy Ideas Into Key Data
We now see a clear policy gap. The Bank of England is signaling possible rate cuts as soon as March after last week’s close 5–4 hold vote. Political pressure on the Prime Minister adds to pound weakness, as it often increases volatility and weighs on the currency. This widening gap between the Fed and BoE outlooks supports a bearish view on the pound.
With major data this week (UK GDP and US CPI), volatility could rise sharply. Buying GBP/USD put options is a direct way to position for a move lower, especially if US inflation is hotter than expected. A daily close below the 50-day moving average near 1.3500 would be our signal to add to these bearish positions.
If you are less sure about direction but expect a big move, option straddles or strangles may fit better. These approaches can profit from a large move either way after the data. They focus on benefiting from the volatility spike itself, whether the bigger surprise comes from UK growth or US inflation.
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