The Pound Sterling strengthens against the US Dollar, driven by mixed UK employment data and worsening US-EU relations. UK employers hired 82K new workers, with the jobless rate steady. Meanwhile, US Dollar weakens amid the US-EU dispute over Greenland.
The GBP/USD pair rises to near 1.3490, extending gains, with the “Sell America” trade gaining momentum. The US Dollar Index is down 0.54% to near 98.50. Tensions follow US President Trump’s 10% tariffs on several EU members and UK, linked to Greenland opposition.
The Uk Labour Market
The UK labour market shows an Unemployment Rate of 5.1%, stability preventing an expected drop to 5%. Average Earnings, excluding bonuses, grew at an annualised pace of 4.5%, while wage growth, including bonuses, rose 4.7%. Cooling wage growth prompts expectations of BoE interest rate cuts.
GBP/USD climbs to near 1.3480, just above the 20-day Exponential Moving Average at 1.3433. The 14-day Relative Strength Index at 57 suggests balanced momentum. Resistance lies at the 61.8% Fibonacci retracement at 1.3491, with a daily close above opening towards 1.3622.
The US Dollar is the world’s most traded currency, accounting for 88% of global forex turnover. The Federal Reserve influences the USD through monetary policy, adjusting rates to control inflation and employment. Quantitative easing typically weakens the USD by increasing currency flow.
The Ongoing Sell America Trade
The ongoing “Sell America” trade, fueled by the diplomatic dispute over Greenland, is the dominant market force right now. With the US Dollar Index falling towards 98.50, we should be looking for opportunities to position against the dollar. The clear momentum is in the Pound Sterling, which is showing strength despite mixed domestic data.
We see a strong case for buying call options on the GBP/USD pair, particularly with strike prices above the 1.3500 resistance level. This strategy gives us exposure to a potential rally towards 1.3620 in the coming weeks while capping our downside risk to the premium paid. Looking back, we saw similar currency swings of 2-3% during the US-China trade tensions of 2019, showing how quickly these political situations can move markets.
Overall market anxiety is increasing, and this is reflected in rising volatility. The CBOE Volatility Index (VIX) has already jumped from its December 2025 lows of 12.8 to over 17, indicating that traders are bracing for bigger price swings. This environment is favorable for purchasing straddles on major pairs like EUR/USD to capitalize on a significant move in either direction.
The upcoming UK inflation report is a critical event to watch. We know that UK CPI was running at 3.1% in the third quarter of 2025, well above the Bank of England’s target. Another high inflation print would likely push the central bank to delay any planned interest rate cuts, which would provide another strong tailwind for the Pound.
On the other side of the trade, we expect the US PCE inflation data to confirm a cooling trend, much like the 2.6% annual rate we saw at the end of 2025. This would solidify the market’s belief that the Federal Reserve has no reason to raise rates, adding further downward pressure on the US Dollar. The diverging inflation outlooks between the UK and the US support a stronger GBP/USD.
This dispute is unusual because the US is the source of the geopolitical instability, diminishing the dollar’s traditional safe-haven status. As a result, capital is rotating into assets like gold, which has broken new highs above $4,700 per ounce. We should consider long positions in gold through futures or call options to participate in this clear flight to safety.
