GBP/USD fell again after UK jobs data showed the labour market is weakening faster. UK unemployment rose to 5.2% in Q4, average earnings eased to 4.2%, and the claimant count increased by 28.6K in January.
Regular private-sector wage growth, a key Bank of England measure, fell to 3.4%, the lowest level in five years. Markets now price in a 25-basis-point BoE cut by April, with a 76% chance of a move in March. Meanwhile, UK CPI, PPI inflation, and Retail Price Index data all came in below forecasts.
Technical Levels And Near Term Direction
On Wednesday, the pair fell 0.5%, extending its drop from January’s four-year highs. Price dipped below the 50-day EMA, while the 200-day EMA sits near 1.3435. A break below 1.3490 opens the way to 1.3400. A move back above the 50-day EMA at 1.3529 would ease downside pressure.
US Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey are due on Thursday, along with several Federal Reserve speakers. UK Retail Sales and PMI data follow on Friday.
The pound dates back to 886 AD and is the UK’s currency. In 2022, it made up 12% of FX trades, averaging $630 billion a day. GBP/USD accounts for 11% of that activity, GBP/JPY 3%, and EUR/GBP 2%. BoE policy is guided by an inflation target of around 2%.
In early 2025, UK labour market weakness signaled the start of the Bank of England’s easing cycle. As unemployment rose to 5.2% and wage growth slowed, markets fully priced in rate cuts that began that spring. At the time, this supported a bearish outlook for Sterling.
How The Macro Backdrop Has Changed
The picture has changed a lot by February 2026. Recent data shows UK unemployment has improved to 4.8%, and January wage growth was stronger than expected at 4.9%. With inflation still high at 2.8%, well above the BoE’s target, the case for larger or faster rate cuts is weakening.
In the US, the economy is holding up well. Initial jobless claims remain near 205,000, and last month’s retail sales beat expectations. This strength suggests the Federal Reserve may keep rates higher for longer than the Bank of England. That gap in policy could limit any major GBP rallies.
For derivative traders, this setup points to strategies that work if GBP stays range-bound or drifts lower. One approach is to buy GBP/USD puts with expirations one to two months out, to benefit if UK data disappoints. Another option is a bearish put spread, which reduces upfront cost while targeting a defined downside move.
Although the pair broke below key moving averages, including the 200-day EMA, back in 2025, it has since rebounded. For now, 1.3600 is initial support, with the stronger psychological level at 1.3500 below it. Any rallies may face resistance near the recent highs around 1.3780.
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