The Pound Sterling (GBP) has decreased by 0.17% as the US Dollar (USD) experiences an increase over two consecutive days. The GBP/USD rate is at 1.3662, having reached a daily high of 1.3715.
On Monday, the Pound Sterling started the week well but later faced pressure from a stronger US Dollar, which found support from political stability in the United States. The GBP/USD rate found temporary support near 1.3660, later climbing slightly above 1.3700 before settling around 1.3670.
Traders Monitor US Data
Traders are keeping an eye on the US ISM Manufacturing Purchasing Managers Index (PMI) data expected later on Monday. Market movements are fast, and the impact of strong US data continues to support the dollar against the Pound Sterling.
The US Dollar’s dominance is the primary theme, fueled by the strong January ISM Manufacturing print of 58.5 and the White House’s nomination of Kevin Warsh to the Fed. This move signals a more aggressive rate hike path, drawing capital towards the dollar. The recent collapse in gold from its highs near $5,600 further underscores this shift into yielding US assets.
For GBP/USD, we see the recent dip to 1.3660 as a continuation, not a bottom. The policy divergence is becoming starker, especially after last month’s UK inflation data came in slightly below expectations at 3.1%. Buying puts on GBP/USD with strike prices below 1.3600 offers a clear way to position for further downside in the coming weeks.
The sharp $1,000 drop in gold is a wake-up call that volatility is back across asset classes. Implied volatility on major currency pairs, including Sterling, has ticked up from the calmer period we saw at the end of 2025. This makes option premiums more expensive, but also suggests that straddles could be a viable play for those expecting more wide swings on upcoming data releases.
Dollar’s Dominance
This is not just a story of Sterling weakness; it is one of broad dollar might. We are seeing the Euro struggle to hold 1.1800 and the Yen push past 155.50, confirming the dollar is the only game in town right now. Therefore, any long positions in Pound Sterling should be hedged aggressively against the dollar.
Looking back at the fourth quarter of 2025, we saw the Bank of England begin to signal a pause in its hiking cycle, contrasting sharply with the Fed’s re-accelerating rhetoric. That divergence, which we flagged at the time, is now playing out as the primary driver for this move. With US 10-year yields now pushing 5.25%, the path of least resistance for GBP/USD remains lower.
