The Pound Sterling has risen by 0.2% against the US Dollar, performing better than other major currencies. This increase follows employment data that exceeded expectations, showing the highest job changes over the last three months since September.

Understanding Current Market Expectations

This data has impacted what people think about the Bank of England’s interest rates. There are mixed opinions on whether there will be more easing. Yield spreads remain stable, and options markets show lower premiums against GBP weakness. The Relative Strength Index is above 50, indicating neutrality, and the 50-day moving average stands at 1.3502, which could act as resistance. We expect resistance near the upper 1.35 range, while support is likely around 1.3350 and resistance around 1.3580. This information is not investment advice. It’s crucial to do thorough research before making financial choices. The information involves risks, and the mentioned entities are not responsible for any errors or omissions. There is no guarantee that the information is accurate or current. Past performance does not predict future results. Always consider your financial situation before investing. With today’s strong UK jobs report, the best in almost a year, the case for a Bank of England rate cut looks weaker. This supports a stronger Pound Sterling against the US Dollar. We are looking into strategies that could benefit from a rising or stable GBP/USD in the short term.

Possible Trading Strategies for GBP/USD

Last week’s UK Consumer Price Index showed July inflation holding at 2.3%, which is still above the Bank’s 2% target. This stubborn inflation, together with a solid labor market, suggests rates will likely remain unchanged through autumn. In contrast, recent softer US inflation data is putting some downward pressure on the dollar. In the options market, the lower premium for protection against a falling Pound makes selling put options on GBP/USD an attractive move. We are considering selling puts with a strike price close to the important support level of 1.3350. This lets us gain premium while betting that the currency won’t drop significantly in the upcoming weeks. Given the expected trading range of 1.3350 to 1.3580, a range-bound strategy seems suitable. We see potential in trades like short strangles or iron condors that can profit as long as the GBP/USD stays within these levels. It will be important to manage positions around the 50-day moving average near 1.3502, which could serve as a pivot. Looking back, the market has been anticipating easing from the Bank of England for months after the rate-hiking cycle that wrapped up in late 2024. Today’s data reminds us that the journey to lower rates isn’t straightforward. We need to stay alert for any changes in central bank messages that could quickly change these expectations. Create your live VT Markets account and start trading now.

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