GBP/USD declined on Tuesday, ending a four-day rise as the pair struggled to stay above 1.3200. UK employment data did not meet expectations, with unemployment rising more rapidly than forecasted, and more people claiming unemployment benefits than anticipated. Wages, including bonuses, fell more than expected, highlighting difficulties in getting higher pay amid growing unemployment. Speeches from Federal Reserve policymakers are set for Wednesday, but no major changes are expected.

Looking Ahead to Key Economic Indicators

UK GDP growth figures for the third quarter are due on Thursday, with predictions suggesting they will remain steady. There are talks about a potential end to the US government shutdown, which has disrupted the flow of important data, following a Senate vote. The Pound Sterling, the UK’s official currency, is the fourth most traded currency worldwide, making up 12% of all foreign exchange transactions. The Bank of England’s monetary policy significantly impacts its value. Economic indicators such as GDP, PMIs, employment, and the Trade Balance influence the Pound’s movements. A positive Trade Balance can boost the currency due to higher demand for exports. Joshua Gibson, a seasoned trader, has joined the FXStreet team, bringing valuable experience from a career focused on technical analysis. GBP/USD is struggling to maintain its gains as it drops back from the 1.3200 level. This decline comes after disappointing UK employment data, which indicated a faster-than-expected rise in unemployment. The data reflect a weakening domestic economy, limiting the pound’s potential.

Trading Strategies and Economic Expectations

This disappointing jobs report is not just a one-time issue; it fits into a larger trend we’ve noticed. Throughout 2024 and into 2025, UK unemployment has consistently increased from the post-pandemic lows, with the latest statistics showing a rise to 4.7% last quarter. This ongoing weakness in the labor market makes it hard for the Bank of England to adopt a more aggressive stance, which is negative for the Sterling. On the other side, the US government shutdown has created uncertainty by stopping the release of key data like the Consumer Price Index. Without this crucial inflation information, predicting the Federal Reserve’s next steps becomes very challenging, leading to uncertainty in the dollar’s movement. In 2018, we saw how a similar shutdown resulted in unpredictable trading conditions due to a lack of data. With UK Q3 GDP figures arriving on Thursday and expected to be flat, there’s little on the horizon to give the pound a strong boost. Given the resistance at 1.3200 and the weak economic backdrop, derivative traders might explore strategies that profit from sideways or downward movements. Selling call options with a strike price above 1.3200 could be a way to benefit from the anticipated lack of upward momentum. The overall situation indicates that the Bank of England faces challenges, as the weakening economy will pressure it to consider rate cuts next year. Markets are starting to factor in a higher chance of a policy shift in the first half of 2026, which is a sharp departure from the rate-hiking cycle that ended in 2024. This long-term expectation is likely to weigh on the pound in the weeks ahead. Create your live VT Markets account and start trading now.

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