GBP/USD Price Forecast - Pound Drops to 1.3290 as Weak Jobs Data Fuels BoE Cut Speculation

GBP/USD Falls Below 1.33 as UK Jobs Data Weakens and BoE Rate Cut Bets Intensify

The British pound (GBP/USD) extended its slide on Tuesday, falling below 1.33 and reaching a session low near 1.3290, after a wave of disappointing UK employment data renewed expectations for additional Bank of England (BoE) rate cuts. The pair, which had already suffered two consecutive sessions of declines, is now trading at its weakest level since early August, with traders eyeing the 1.3200 psychological support as the next key target.

UK Labor Market Weakness Deepens

Data from the Office for National Statistics (ONS) confirmed that the UK labor market continues to soften. The ILO unemployment rate climbed from 4.7% to 4.8%, marking the highest reading since 2021, while the Employment Change figure fell sharply from 232K to 91K, well below forecasts of 123K.
Meanwhile, jobless claims surged to 25.8K, a major jump from August’s -2K revision, reinforcing signs of deteriorating hiring momentum. Wage data offered mixed signals—average weekly earnings including bonuses rose to 5.0%, but excluding bonuses, wages eased to 4.7%, the slowest pace since March 2022.

These figures reflect a clear cooling in the UK labor market and provided fresh justification for BoE doves arguing for policy easing. The market is now pricing in a 70% probability of a 25-basis-point cut before year-end, although some traders expect the next move only in March 2026. Monetary Policy Committee (MPC) member Megan Greene acknowledged that “policy remains restrictive” but noted that further cuts could be warranted if inflation trends toward the 2% target.

Market Sentiment: Sterling Hit by Data, Dollar Finds Support

The weak UK data arrived amid cautious global sentiment. The U.S. Dollar Index (DXY) steadied near 99.17, down marginally by 0.07%, after recovering from early losses linked to easing U.S.–China trade tensions. Risk appetite across markets remains fragile, with traders awaiting Federal Reserve Chair Jerome Powell’s speech later in the day for signals on the Fed’s next steps in its rate-cut cycle.

Meanwhile, in the United States, small business optimism deteriorated. The NFIB Business Optimism Index fell by 2 points to 98.8, its first decline in three months, as firms cited weaker demand expectations and higher costs. This decline adds to signs that the U.S. economy may be entering a mild slowdown phase—a trend that, if confirmed, could weigh on the dollar later in the quarter.

Technical Analysis: GBP/USD Nears Key Support Levels

From a technical standpoint, GBP/USD (FX:GBPUSD) remains under bearish pressure. The pair’s daily chart shows strong resistance forming around 1.3350, with the 20-day Simple Moving Average (SMA) at 1.3434 and the 50-day SMA at 1.3472 capping any near-term rebounds.
Momentum indicators confirm the downtrend: the Relative Strength Index (RSI) remains below 40, indicating persistent selling strength. A sustained close below 1.3300 would likely open the path toward 1.3200, with the 200-day SMA at 1.3178 providing a key technical floor.
If that level breaks, further downside could extend to 1.3125 and 1.3000, both of which represent medium-term supports aligned with historical demand zones. Conversely, a bounce above 1.3335–1.3360 could signal a temporary correction, but broader sentiment remains bearish until the pair reclaims 1.35.

Macro Outlook: Diverging Policies and Powell’s Impact

The divergence between the BoE’s dovish tone and the Fed’s cautious approach is setting the tone for GBP/USD. Traders are increasingly positioning for the BoE to accelerate its easing cycle, while the Fed appears likely to proceed more slowly amid mixed U.S. data.
Upcoming remarks from Jerome Powell could be pivotal: if the Fed signals continued patience or hints at fewer rate cuts, the dollar could find additional support, pushing GBP/USD closer to 1.32 or even testing the 1.3170 region in the coming sessions.

Verdict: Bearish Bias Maintained

Given the weakening UK macro backdrop, slowing wage growth, and sustained dollar demand, the near-term outlook for GBP/USD remains bearish. Unless the BoE surprises with a hawkish tone or the Fed adopts a notably dovish stance, the pair is likely to remain under pressure.
A decisive break below 1.3200 could trigger momentum toward 1.3120, while resistance remains capped around 1.3350. The current setup favors selling on rallies, with traders closely watching Powell’s tone and U.S. data for directional confirmation.

Verdict: SELL — Target: 1.3200, Stop-Loss: 1.3360

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