Sterling fell for a second day on Thursday, easing about 0.05% against the US Dollar as firmer US macro data underpinned the greenback and traders awaited Federal Reserve speakers at Jackson Hole. GBP/USD traded at 1.3588 after touching an intraday high near 1.3600. Initial Jobless Claims for the week ending 22 August came in at 203K versus 208K expected, while the goods trade deficit widened to $118.8bn in July from $102.1bn a month earlier; it was the largest gap since March 2025, when it set a record as firms accelerated imports before Trump’s “Liberation Day” tariffs announcement. The US Dollar Index (DXY) held at 99.14.
Comments from Fed officials reinforced the focus on sticky inflation in their policy deliberations, adding to downside pressure on GBP/USD; the UK calendar was empty, leaving the pair driven by US Dollar dynamics. On the charts, the pair hovered around 1.3590, supported by a simple moving average cluster near 1.3417 and trend-line levels around 1.3393–1.3394 and 1.3488. The Relative Strength Index (14) sat near 60 and the Fed Sentiment Index was around 132, with resistance at 1.3631 and 1.3676.
Dollar Momentum and Derivative Strategies
We see the US Dollar holding firm near the 99.14 level as strong economic data and hawkish Federal Reserve comments weigh on the Pound Sterling. With US weekly jobless claims falling unexpectedly to 203,000, the American labor market remains remarkably tight, which is keeping inflation risks alive. This environment suggests we should prepare for continued near-term pressure on the GBP/USD pair, which is currently trading around 1.3588.
Given the rising expectations of further Fed tightening, we recommend that derivative traders look at buying short-term GBP/USD put options to hedge against sudden downward moves. Historically, during hawkish Fed shifts at the Jackson Hole Symposium, implied volatility for the currency pair tends to spike by 10% to 15% as traders price in higher rate risks. This strategy allows us to capture the downside potential if the pair breaks below its immediate support level of 1.3488.
Technical Outlook and Domestic Drivers
While the broader technical outlook remains bullish with the Relative Strength Index hovering near 60, we must watch the cluster of simple moving averages near 1.3417 closely. If the US dollar index continues its upward momentum, a break past this technical floor could accelerate selling toward the 1.3393 level. On the flip side, we can target resistance near 1.3631 for any quick relief rallies if upcoming US economic data begins to cool down.
As we head into the coming weeks, the return of the UK Parliament and details surrounding Prime Minister Andy Burnham’s upcoming Autumn Budget will introduce fresh domestic volatility. Traders should watch for any massive fiscal spending plans that could push UK inflation higher, potentially forcing the Bank of England to adjust its policy. We can use option straddles to benefit from these sharp political and economic announcements, regardless of which way the market swings.
