The GBP/USD pair fell over 60 pips during the American session on Wednesday, driven by strong economic data from the US. The British Pound had been strong initially but couldn’t hold up against the growing demand for the US Dollar. The US published positive news, with the ADP Employment Change report showing 104,000 new private sector jobs in July, beating the expectation of 78,000. The revised figures for June also improved, showing a job decrease of only 23,000 compared to the earlier reported 33,000. The flash estimate for Q2 GDP showed a surprising annual growth of 3%, higher than the expected 2.4%. This also marked an improvement from Q1’s decline of 0.5%. The core PCE Price Index rose by 2.5% in Q2, down from 3.5% in Q1. This strong US economic performance comes just before the Federal Reserve’s monetary policy meeting. The Fed is expected to keep interest rates between 4.25% and 4.50%. President Trump has criticized the Fed’s high rates, urging a reduction by three points, which raises questions about how he might react to the Fed’s decision. The GBP/USD has now fallen for six consecutive days, reaching its lowest point since mid-May. Daily analysis reveals a strong downward trend, with initial support near 1.3250 and 1.3200, while potential recoveries could target the 1.3360 and 1.3420 levels. We are witnessing a familiar trend today, July 30, 2025, when comparing it to previous instances of strong US economic data. This pattern, where positive US news supports the dollar and drags down GBP/USD, poses a risk for the coming weeks. The historical context of political pressure on the Federal Reserve serves as a reminder of how quickly market sentiment can change. Currently, the Bank of England faces its own challenges. The latest inflation data from earlier this month shows UK CPI at 2.1%, just above the BoE’s target. This has led to the Bank Rate remaining steady at 5.0% for the last quarter, making traders attentive to any signs of a potential rate cut. In the US, economic indicators paint a stronger picture than in the years following the pandemic. This month’s Non-Farm Payrolls added a robust 190,000 jobs, while the most recent Core PCE reading was 2.8%, indicating that inflation pressures are slowly easing. This data supports the Federal Reserve’s cautious approach, with their benchmark rate at 5.25%. The current differences suggest that implied volatility on GBP/USD options may rise ahead of the central bank meetings in August. Traders might consider long straddles, which allow for profits from major price moves in either direction. This strategy can protect against unexpected policy announcements from either the Fed or the BoE. Looking back at late 2024, the 1.2450 level has proven to be a key support for GBP/USD. Thus, purchasing put options with a strike price under 1.2450 might be a cost-effective way to prepare for a potential decline. This could happen if the Fed maintains a more hawkish stance than the market anticipates. Current market expectations, shown in Fed funds futures, suggest a 30% chance of a US rate cut before the year’s end. This means that any unexpectedly strong US jobs or inflation report in the coming weeks could quickly boost the dollar, putting renewed pressure on the pound, similar to previous sell-offs.

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