The Pound Sterling is trading softly, declining by 0.2% against the US Dollar, as reported by Scotiabank. The currency’s recovery seems to have paused after disappointing employment data, indicating a post-COVID high in the unemployment rate at 5%.
UK rate expectations show signs of stabilisation following a decline driven by jobs data. UK-US yield spreads have improved, but the Pound’s recent gains due to these spreads have been lessened by the data’s impact.
The Pound’s Defensive Trade
We are seeing the Pound trade defensively as we head into the middle of November 2025. This follows yesterday’s disappointing UK jobs report, which showed the unemployment rate hitting a new post-COVID high of 5.0%. The recovery we saw in the Pound over the last month appears to have completely stalled.
The details of the report were particularly concerning, with wage growth slowing to 3.5% against market expectations of 3.9%. This data has led us to push back expectations for any Bank of England rate hikes. Overnight index swaps are now pricing in less than a 20% chance of a rate increase in the first quarter of 2026.
This economic weakness in the UK contrasts sharply with a more resilient US economy, where the October jobs report added a solid 210,000 positions. This growing policy divergence is keeping the US Dollar strong and putting sustained pressure on the GBP/USD exchange rate. This reminds us of the trend we observed in late 2022 when differing central bank paths heavily favored the dollar.
Potential Slide Strategies
We are now closely watching the December 2020 unemployment high of 5.3% as the next key technical and psychological level. Looking back at historical data, we saw how periods of economic uncertainty, like the one following the 2016 Brexit referendum, led to sharp increases in implied volatility. This suggests that option premiums may become more expensive if this negative trend continues.
Given this backdrop, we should consider strategies that benefit from further downside or protect existing long positions. Buying GBP/USD put options or establishing bearish put spreads could be effective ways to position for a potential slide in the coming weeks. These derivatives offer a defined-risk way to capitalize on the current negative sentiment surrounding the Pound.
