UK payroll numbers were revised upwards, easing pressure on the Bank of England as inflation remains high. In the US, Fed Governor Waller supports a rate cut in July, while President Goolsbee is cautious about inflation due to tariffs. US consumer sentiment improved, with the index increasing to 61.8, and inflation expectations for the next five years dropped to 3.6%. During the North American session, GBP/USD rose by 0.21%. The pair was trading at 1.3442, up from a low of 1.3406. In the UK, limited economic data showed a better jobs report, revising May’s payroll numbers from -109K to -25K. This alleviates some worries about the labor market and offers the Bank of England some relief as inflation remains above 3%.

Future Outlook For The UK And US Economy

Looking ahead, the UK will release S&P Global Flash PMIs and Retail Sales data next week. In the US, attention will be on housing data, Flash PMIs, and Durable Goods Orders. GBP/USD is currently showing a modest bullish trend. If it surpasses the 50-day Simple Moving Average at 1.3506, more gains could follow. If it drops below 1.3400, the next support will be at 1.3369. We see opportunities in the different paths of central bank policies in the coming weeks. While one colleague is cautious, Mr. Waller’s support for a rate cut fits with the recent US inflation data, which cooled to 3.3% in May. A potential rate cut in the US could weaken the dollar, pushing the currency pair higher. In the UK, the situation is more complicated, leading to possible volatility around key data. Although payrolls improved, recent official data shows that inflation has dropped to the central bank’s 2% target. This, along with a surprising 2.9% rise in May retail sales, sends conflicting signals to policymakers, likely keeping rates on hold.

Investment Strategy Using Options

We recommend using options to trade this forecast, as upcoming reports from both regions could cause sharp movements. Buying call options with a strike price above the current 1.3442 level, targeting the 1.3506 resistance, would enable traders to benefit from a price rise while limiting potential losses. This strategy is especially relevant before next week’s purchasing managers’ indexes. Historically, GBP/USD experiences higher volatility around major economic announcements and central bank changes. For example, the pair moved significantly after the unexpected UK election announcement in May. Using derivatives allows for a defined-risk approach to capture potential breakouts without being fully exposed to unexpected news. Create your live VT Markets account and start trading now.

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