GBP/USD fell 0.71% (nearly 100 pips) to around 1.3529 during Tuesday’s North American session, following the US Presidents’ Day holiday. The drop came after a weaker UK jobs report.
ONS data showed the ILO unemployment rate rose to 5.2% in the three months to December, up from 5.1% in November and above forecasts. It was the highest level in a decade, excluding the pandemic period. Average earnings excluding bonuses slowed to 4.2% from 4.4% over the same period.
Market Pricing Shifts
Prime Market Terminal put the odds of a 25 bps Bank of England cut at 71% for the 19 March meeting. For the full year, money markets priced in 49 bps of easing.
UK CPI data is due on Wednesday. January inflation is expected to cool to 3.0% from 3.4%. In the US, the New York Empire State Manufacturing Index rose to 7.1 in January, slightly above the 7.0 expected, and down from 7.7 in December.
The ADP Employment Change four-week average rose to 10.3K from 7.8K. GBP/USD was also quoted near 1.3502. A nearby level sits at 1.3522, with support around 1.3511, while a trend line stems from 1.3035.
Around this time in 2025, a weak UK jobs report also pushed the pound sharply lower. Unemployment had reached a decade-high of 5.2% (excluding the pandemic), and markets quickly priced in a strong chance of a Bank of England rate cut in March.
Policy Divergence
Today, the picture looks different. UK unemployment has improved to 4.5% for the three months ending December 2025. More importantly, inflation remains sticky, with January 2026 CPI holding at 2.9%, still well above the central bank’s target. As a result, expectations for a near-term rate cut have dropped sharply, and markets now see only a small chance of a move before summer.
In the US, the Federal Reserve remains cautious, much as it was in 2025. Recent comments from officials continue to stress a data-dependent approach, especially with core inflation still above 3%. This “higher for longer” stance in the US contrasts with the pressures facing the UK economy.
This setup points to a different playbook than the simple short seen in 2025. With the US dollar still holding a clear rate advantage, traders may prefer strategies suited to range-bound trading or limited upside in GBP/USD. Options approaches such as selling call spreads may fit this view, based on the idea that any meaningful pound strength could be capped.
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