Insights 
VT 
GBP/USD rises to near 1.3350 as speculation grows over a potential US-UK trade deal under President Trump’s administration. The US Dollar may gain momentum with the Federal Reserve’s cautious stance on monetary policy.
During the Asian session, GBP/USD recovers from recent declines, trading near 1.3340. The anticipation of the trade deal announcement fuels the Pound Sterling’s recovery.
Trade Agreement Speculation
US President Trump is expected to reveal the trade agreement, though this has yet to be confirmed. Meanwhile, the US Dollar Index, measuring the Dollar against six major currencies, stands around 99.70.
The Federal Reserve’s latest meeting kept interest rates at 4.25%–4.50% due to inflation and unemployment worries. Fed Chair Jerome Powell acknowledged trade tariffs could hinder inflation and employment goals in 2025.
The Pound Sterling is the world’s oldest currency and ranks fourth in global trading, accounting for 12% of foreign exchange transactions. The Bank of England’s interest rate decisions, influenced by inflation and economic data, directly affect the currency’s value.
Economic indicators like GDP, PMIs, and employment figures significantly influence the Pound. A country’s Trade Balance also affects currency strength, with positive balances generally enhancing currency value.
Currency Market Dynamics
With GBP/USD hovering near 1.3350, the pair has clearly responded to fresh speculation around a potential trade agreement between the United Kingdom and the United States under the administration of President Trump. While formal confirmation remains absent, pricing in of forward-looking news has historically been a catalyst for shifts in currency valuations, and evidently, traders are tilting their exposure in anticipation. The speculation—combined with the possibility of more favourable terms for UK exports—has lent short-term support to the Pound.
From our perspective, the modest recovery seen during the Asian session, with GBP/USD bouncing back from earlier declines into the 1.3340 range, reflects renewed interest from buyers who may be seeking to capitalise on perceived political tailwinds. However, the UK currency remains fundamentally tied to economic data and policy decisions, meaning macro indicators must still be monitored closely in the week ahead.
On the other side of the pair, the Dollar has been showing limited directional strength in the past few sessions, trading in a relatively tight range against a basket of currencies. With the US Dollar Index sitting around 99.70, it seems the market is taking a balanced view. The cautious tone adopted by the Federal Reserve appears to be keeping a cap on aggressive Dollar buying. Their decision to leave interest rates on hold at 4.25%–4.50%, outlined in their latest meeting, reflects ongoing reservations about inflation control and labour market sustainability.
Powell’s comments, where he highlighted the challenges posed by trade tariffs to inflation targets and employment prospects by 2025, are noteworthy. This gives us an insight into the Fed’s internal recalibration—less willingness to act aggressively in the near term unless data forces their hand. For interest-rate sensitive instruments, this points to reduced volatility forecasts unless headline figures deviate meaningfully from expectations.
Meanwhile, the Pound’s identity as a top actively traded global currency, supported in part by its 12% share in global FX turnover, lends the pair its typical liquidity. Even so, strength in the currency frequently tracks closely with the Bank of England’s interest rate trajectory. We must therefore keep a close watch on incoming price, employment, and GDP data, particularly in sectors disproportionately affected by trade developments.
Currently, the trade balance trend has leaned less favourable for the UK, but any resurgence in exports—suggested as a possible outcome of a new deal—could shift sentiment. Whether the Bank of England will interpret this as medium-term inflationary or a win for broader economic activity remains to be seen. Markets with high forward rate sensitivity, such as short-term Sterling contracts, could react quickly.
Until more tangible policy action or economic print emerges, we are watching short-term support and resistance levels closely. Momentum traders may view the 1.3350 handle as a short-term inflection point, while others may adopt a wait-and-see approach depending on signals from either central bank or further political developments. Respecting scheduled economic data remains essential. Holding positions through volatility tied to headline risk—particularly unconfirmed political announcements—requires tight risk parameters.
