The Pound Sterling rose on Tuesday after positive UK job market data for the second quarter. The economy added 239,000 jobs, beating the previous month’s total of 134,000. The unemployment rate remained steady at 4.7%, and there was an unexpected drop of 6,200 in the Claimant Count Change. Earnings data showed a slight slowdown, with average earnings excluding bonuses rising by 5%, as predicted. Including bonuses, the growth was 4.6%, just below the forecast of 4.7%. The strong job growth could support the Bank of England’s cautious approach to monetary policy after a recent 25 basis point interest rate cut.

Pound Sterling Performance

The Pound traded around 1.3440 against the US Dollar, staying above key support levels. The GBP/USD pair remains above the 20-day Exponential Moving Average of 1.3408. Meanwhile, the US Dollar Index approached a two-day high of 98.50 before US inflation data is released, which is expected to show increases in both overall and core CPI rates. Economists anticipate that US headline inflation will rise to 2.8% and core inflation will reach 3% year-over-year. Market participants are watching how these inflationary pressures may influence Federal Reserve interest rate policy, as well as ongoing US-China trade negotiations and tariff discussions. The strong UK job numbers suggest that the Bank of England might need to reconsider its recent interest rate cut. With 239,000 jobs added, the UK economy appears stronger than the Bank’s recent decision indicated. This boosts our outlook on the Pound Sterling for the upcoming weeks. The jobs report adds to other recent data showing unexpected economic strength. For instance, the UK CPI for July 2025 increased to 2.4%, exceeding the Bank’s target and putting pressure on them to maintain current rates. Markets reflect this change, with overnight index swaps indicating no further rate cuts from the Bank of England for the rest of 2025.

US Inflation Data and Market Impact

Across the Atlantic, US inflation data has been released, and it came in higher than expected, with Core CPI at 3.1% year-over-year. This supports the Federal Reserve’s “higher for longer” interest rate stance, boosting the US Dollar. The US Dollar Index is now testing the 99.00 level, the highest it’s been since May of this year. This sets up a classic tug-of-war for traders, as both the UK and US show strong reasons for their currencies to rise. We expect this tension in the GBP/USD pair to increase volatility, making options strategies appealing. The pair’s struggle to break decisively above 1.3500 indicates market uncertainty. With technical support for GBP/USD just above 1.3400, buying short-dated call options seems a good way to prepare for a potential breakout. However, given the dollar’s strength, purchasing put options with a strike price below 1.3400 can offer protection against a hawkish Fed overshadowing the positive UK news. In the spring of 2025, market sentiment was more pessimistic about the UK economy, with many expecting a significant slowdown. The recent turnaround in data may have caught many traders off guard. Therefore, we should be ready for sharp movements as older positions are adjusted. Create your live VT Markets account and start trading now.

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