GBP/USD is steady at 1.3465 during early Thursday trading in Europe. Traders are cautious ahead of important US employment data, which will be released on Friday. The market is also focusing on the Bank of England’s (BoE) policy outlook, which could help support the Pound Sterling. The pair remains unchanged as everyone looks forward to US economic data, especially the Initial Jobless Claims and Nonfarm Payrolls (NFP) report. December’s US jobs data is crucial as it could hint at future interest rate actions. The NFP is expected to rise by 60,000, and unemployment is predicted to fall from 4.6% to 4.5%.

GBP/USD Factors

Positive US data might change expectations about interest rate cuts and affect GBP/USD dynamics. On the other hand, dovish comments from the Fed could weaken the USD, benefiting the pair. Fed officials have suggested possible rate cuts, while the Bank of England might ease its policy gradually due to high inflation, influencing rate expectations. Pound Sterling is the official currency of the UK and one of the most traded currencies in the world, making up 12% of all transactions. Its value depends a lot on the monetary policy of the Bank of England. Economic indicators like GDP and the Trade Balance also affect GBP’s value. A positive Trade Balance typically strengthens the currency. The market is clearly on pause ahead of the critical US Nonfarm Payrolls (NFP) report due tomorrow. This uncertainty presents an opportunity for volatility-based trading strategies. Traders might consider options like straddles or strangles on GBP/USD, which are designed to capture significant price movements in either direction after the jobs data is released. If tomorrow’s NFP number disappoints and comes in below the 60,000 forecast, it would reinforce the trend of a slowing US labor market seen in late 2025. Remember, November 2025’s report showed just 85,000 jobs added, so a lower number now would raise expectations for quicker and deeper rate cuts from the US Federal Reserve. This scenario would likely weaken the dollar and push GBP/USD higher, benefiting traders with call options.

Market Response to US Jobs Data

In contrast, a stronger-than-expected jobs report would challenge the recent dovish comments from Fed officials and counter the market’s expectations for rate cuts. In this case, the US dollar would likely strengthen against the pound. Traders with put options would profit as GBP/USD declines. Looking ahead, the Bank of England’s position should offer underlying support for the pound. Recent UK inflation data from late 2025 shows a steady rate of 3.5%, making it harder for the BoE to cut rates compared to the Fed, which faces US inflation around 2.8%. This difference in policy, where the BoE is more cautious about easing, is a positive factor for the pound against the dollar. This divergence suggests a strategy for the coming weeks could be to position for a gradual rise in GBP/USD. After the synchronized and aggressive rate hikes seen globally in 2023 and 2024, the path forward will be less uniform. We believe that buying longer-term call options or setting up bull call spreads could be a smart move to take advantage of this trend. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now