In January, the UK’s S&P Global Manufacturing PMI exceeded forecasts with a reading of 51.8 against the expected 51.6. This reflects an ongoing evaluation of economic indicators within the manufacturing sector.
The EUR/USD pair dropped to daily lows around 1.1840, influenced by a rebound in the US Dollar. Attention is now turning to the upcoming release of US ISM Manufacturing data for further market insights.
Impact on the GBP/USD Rate
The GBP/USD rate experienced a decline as it hovered near the 1.3670 mark due to a strengthening US Dollar. This development comes as market focus shifts towards the impending Bank of England event.
Gold prices showed a modest recovery, flirting with $4,800, having come off monthly lows near $4,400 per troy ounce. Despite this, the firm US Dollar keeps the broader downtrend intact.
Bitcoin witnessed a drop below $75,000 amid increasing selling pressure, correcting nearly 11% in the past week. Technical indicators point towards a potential downturn to the next support level of $70,000.
Market activities remain under scrutiny following the nomination of Kevin Warsh as the next Fed chair. This has resulted in notable movements across multiple financial instruments and currencies.
Market Strategies Following Warsh Effect
The nomination of Kevin Warsh as the next Fed chair is strengthening the US dollar, an event we are calling the “Warsh effect.” This is creating downward pressure on major currency pairs and commodities, a trend that is likely to continue. We should therefore consider positioning for sustained dollar strength through derivatives like call options on the US Dollar Index (DXY).
EUR/USD has already dropped to the 1.1840 area, and with the key US ISM Manufacturing data due, we could see more weakness. Last month’s ISM Manufacturing PMI registered a contraction at 47.1, so any number above 50 would significantly boost the dollar and could be a catalyst to buy put options on the EUR/USD pair.
For GBP/USD, the situation is complex as the pair hovers around 1.3670. The stronger-than-expected UK manufacturing PMI of 51.8 signals underlying economic health, but the upcoming Bank of England meeting creates uncertainty. Considering that UK inflation in late 2025 was still above the BoE’s 2% target, a volatile reaction is possible, making a strangle option strategy a viable way to trade the event without betting on direction.
Gold’s bounce off the $4,400 lows looks temporary, with the price currently near $4,800. A hawkish Fed outlook historically hurts non-yielding assets, similar to the pressure we saw during the 2022-2023 tightening cycle which pushed real yields higher. We can expect this pattern to repeat, making put options or short-dated futures contracts on gold an attractive strategy.
In energy markets, easing tensions in the Middle East are pushing WTI crude prices lower. This fundamental shift is compounded by stable OPEC+ output, suggesting the path of least resistance is down. This view is supported by recent EIA data showing crude oil inventories have increased by an average of 1.5 million barrels per week over the last month, pointing to a well-supplied market.
The crypto market’s correction appears set to continue, with Bitcoin falling below $75,000. The initial excitement from the spot ETF approvals back in 2024 has given way to sustained outflows and declining retail interest. With technical momentum clearly bearish, we see opportunities in buying puts with strike prices near the next major support level of $70,000.
