The GBP/USD pair has dropped to about 1.3610 in early Monday’s Asian trading. This decline follows comments from the Bank of England (BoE) that suggest a “gradual downward path” for its policy, raising expectations for an interest-rate cut. In its January meeting, the BoE kept interest rates at 3.75% but hinted at potential cuts to bring inflation to their 2% target. There are also speculations that UK Prime Minister Keir Starmer might resign, which could put further pressure on the GBP against the USD.

Insights on the US Employment Report

On Wednesday, we will receive the delayed US employment report for January, which is expected to show an increase of 70,000 jobs with the unemployment rate holding steady at 4.4%. The Pound Sterling, the official currency of the UK, plays a vital role in foreign exchange, accounting for 12% of global transactions. The BoE’s interest rate decisions are crucial for the GBP’s value, as higher rates generally make the currency more appealing. Economic data like GDP and employment reports can significantly influence the GBP. A strong economy might lead the BoE to raise rates, boosting the GBP’s value. A healthy trade balance can also strengthen a currency due to higher foreign demand for exports.

Bank of England’s Interest Rate Strategy

The Bank of England is clearly leaning towards lower interest rates, with a cut in March looking very likely. This suggests that the GBP/USD pair may trend downwards in the coming weeks. The difference in policies is especially important if US officials continue to be cautious before making any changes. We saw UK inflation drop to 2.5% in the last quarter of 2025, down from 4% earlier that year. While this is a positive sign, it allows the BoE to justify rate cuts to boost a sluggish economy that grew less than 0.5% in the second half of 2025. This makes holding GBP less attractive compared to the dollar. Given this outlook, buying GBP/USD put options appears to be a wise choice. This strategy would profit from a drop below the 1.3600 level while clearly defining the maximum risk as the premium paid. We suggest looking at options that expire after the BoE’s March meeting to take advantage of the anticipated rate cut. Increased political uncertainty, like the current rumors about the Prime Minister, often weighs on a currency. Looking back at the market chaos during the leadership struggles of 2022, we can see how quickly political instability can hurt the pound. This adds another layer of risk for traders to consider. The main risk to this bearish outlook comes from Wednesday’s delayed US employment report. The forecast of only 70,000 new jobs seems weak compared to the average of over 150,000 seen in late 2025. A surprisingly low number could weaken the dollar significantly, leading to a sharp but temporary rise in the GBP/USD pair. Create your live VT Markets account and start trading now.

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