The GBP/USD pair is currently in a tight range as traders await key labor market data from the U.S. The market is paying close attention to the Non-Farm Payroll report, which will significantly impact interest rate predictions. Right now, there is an 89% chance of a rate cut in September, with expectations of a total easing of 55 basis points by the end of the year. Strong data might make a September cut less likely, while weak data could increase the chance of a dovish policy, affecting the dollar. In the UK, the Bank of England recently made a hawkish cut, and data indicates persistent inflation. The latest Consumer Price Index (CPI) in the UK was stronger than expected. Although recent Flash PMIs showed mixed results, they still suggest economic strength. The central bank aims to lower inflation to 2% despite some weakness in the labor market. Core inflation has been over 3% since 2021.

Technical Analysis

On the daily chart, GBP/USD is trading between resistance at 1.3590 and support at 1.3368, with sellers expected to appear near the resistance. The 4-hour chart shows a recent break above a minor trendline, indicating buyer interest targeting the resistance. In the 1-hour chart, buyers entered at a swing low of 1.3486, which may act as a minor support level. Key upcoming events include U.S. Jobless Claims and the PCE price index. As of August 28, 2025, the GBP/USD pair remains caught between critical resistance at 1.3590 and support at 1.3368. The market is relatively quiet, waiting for important U.S. labor market data next week, which will be the primary driver of movement. Attention is focused on the Federal Reserve, with an 89% chance of a rate cut in September. Today’s weekly jobless claims report showed 235,000 claims, slightly above expectations, supporting the notion of a cooling labor market and reinforcing rate cut expectations. This situation puts pressure on the U.S. dollar. Given the uncertainty surrounding next week’s Non-Farm Payrolls report, a good strategy could be to buy GBP/USD option straddles. A strong report, perhaps exceeding 250,000 jobs like earlier in 2024, could challenge the rate cut narrative and push the pair towards the 1.3368 support. Conversely, a weak report below 150,000 would likely confirm a cut and break through the 1.3590 resistance.

Bank of England Challenges

On the flip side, the Bank of England is dealing with ongoing inflation issues. The latest UK CPI data for July 2025 surprised everyone by rising to 3.5%, despite expectations for a decline. Historically, UK core inflation has stayed above 3% since 2021, making the central bank’s task difficult. This divergence in policy—where the Fed is likely to cut rates and the BoE must remain cautious due to high inflation—supports the pound. Traders who believe this trend will persist might consider selling out-of-the-money put options on GBP/USD with expirations in the coming months. This strategy would allow them to collect premiums based on the view that the strong support at 1.3368 is unlikely to break. For those with a lower risk appetite, the current range presents clear opportunities. As the price approaches the 1.3590 resistance level before next week’s data, selling call options with a strike price just above it can be a smart move. This capitalizes on the expectation that the pair will stay contained until a major catalyst forces a breakout. Create your live VT Markets account and start trading now.

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