GBP/USD fell for a second day, down 0.12%, after a strong US Nonfarm Payrolls report. The pair traded at 1.3205, while US inflation has stayed above target for five years.
The BLS said the US created over 178K jobs in March, beating a 60K forecast. February was revised down to -133K, and unemployment fell to 4.3% from 4.4%.
Dollar Strength And Fed Pause
The US Dollar Index rose 0.12% and moved back above 100.00. Markets weighed the chance that the Fed keeps rates unchanged as the Middle East conflict continues.
The S&P Global Services PMI fell to 49.8 in March from 51.7 in February, its first contraction since January 23. The report also pointed to slower hiring and rising price pressure.
CBOT data showed reduced expectations for rate cuts, with pricing centred on rates staying flat this year. US Treasury yields, including the 2-year, edged higher after the jobs data.
On charts, GBP/USD stayed below clustered SMAs near 1.3550 after failing near resistance from 1.3869, and moved away from support from 1.3035. Resistance is seen at 1.3300, 1.3400, and 1.3500, while support sits at 1.3200, 1.3100, and 1.3035.
Echoes Of March 2025
We saw this same dynamic back in March 2025, when a surprise 178K jobs report initially strengthened the dollar. This pushed GBP/USD down to the 1.32 level, setting a bearish tone for much of that year. That period reminds us how quickly sentiment can shift based on a single data point.
The forecast for the Fed to hold rates steady proved correct throughout the second half of 2025, largely due to persistent inflation. We can see this trend continuing now, with the latest US CPI for March 2026 coming in at 3.4%, well above the Fed’s target. This sustained price pressure validates the hawkish stance that began taking shape over a year ago.
In contrast, the UK economy has shown signs of slowing, with GDP contracting by 0.2% in the first quarter of 2026. This puts the Bank of England in a difficult position, fueling speculation it may need to cut rates before the Fed. This growing policy divergence suggests buying put options on GBP/USD could be a prudent strategy to hedge against or profit from further sterling weakness.
Implied volatility for GBP/USD options has climbed from last year’s lows, reflecting the current uncertainty. With the pair now trading near 1.2950, traders could consider strategies like long strangles, which involve buying both an out-of-the-money put and call option. This approach allows for profiting from a significant price move in either direction over the coming weeks, which is likely as central bank decisions approach.
The technical picture has evolved since last year, with the old support around 1.3035 now acting as a key resistance level. A failure to break above this point in the near term would reinforce the bearish outlook. Consequently, we are positioning for a potential test of the 1.2800 psychological level in the next several weeks.
