GBP/USD fell on Tuesday. It dropped below 1.3600 and touched around 1.3570. The move followed UK jobs data that showed weaker conditions.
The UK ILO Unemployment Rate rose to 5.2% in the three months to December. That is the highest level in almost five years and was above forecasts of 5.1%. The Claimant Count rose to 28.6K in January, up from 2.7K in December. Employment change also slowed, slipping to 52K from 82K.
Uk Wage Growth Slows
Wage growth cooled. Average Earnings Including Bonus rose 4.2% year on year in the last three months of 2025, down from 4.6%. Markets had expected 4.6%.
This release followed a weak UK GDP report last week. Together, the data increased expectations that the Bank of England could lower borrowing costs at its March meeting.
A correction dated 17 February at 08:24 GMT said the unemployment period was the three months to December, not January. It also clarified that the earlier 4.6% figure referred to Average Earnings Including Bonus, not Average Earnings Excluding Bonus.
The latest labour data suggests the UK economy is losing momentum. Unemployment has reached a five-year high at 5.2%, and wage growth slowed more than expected. This weakness also matches last week’s GDP report, which showed the economy shrank by 0.1% in the final quarter of 2025.
Rate Cut Expectations Build
These numbers increase pressure on the Bank of England to cut interest rates in March. Overnight index swaps now price in an 80%+ chance of a cut next month. This contrasts with the US, where strong job data has pushed back expectations for Federal Reserve rate cuts.
We think traders should consider buying GBP/USD put options with strike prices near 1.3500 or lower. Late-March or April expiry could help capture downside after the central bank decision. This approach offers a way to profit from further GBP weakness while keeping risk limited to the premium paid.
This setup is similar to past episodes, such as mid-2019, when repeated weak data was followed by a sharp fall in sterling. As the March meeting gets closer, we expect implied volatility in sterling options to rise. Taking bearish positions now may be cheaper than waiting until volatility increases.
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