Sterling fell 0.39% on Wednesday as the Dollar recovered after US inflation data kept Federal Reserve tightening expectations in play. GBP/USD slipped below 1.3600 after touching 1.3651. July Core PCE was unchanged at 3.3% year on year, while headline PCE held at 3.7% year on year versus a 3.6% consensus. Elsewhere, US GDP expanded at a 1.5% annual rate in Q2 2026, and Durable Goods Orders rose 1.1% month on month after 0.5% in June.
Following the releases, the Dollar Index (DXY) added 0.27% to 99.17, while the 10-year Treasury yield rose four basis points to 4.664%. Money markets put the chance of a September hike at 39%, and were pricing 27 bps of tightening by December with 74% odds of a 25-bps move. With no UK data scheduled, attention turns to US Initial Jobless Claims, the University of Michigan Consumer Sentiment Index and Kevin Warsh’s Jackson Hole address. Technically, GBP/USD trades near 1.3594 above the 50/100/200-day SMA cluster around 1.3410; RSI sits near 60, with resistance at 1.3628 and 1.3676 and support at 1.3490, then 1.3410–1.3390.
Strategies for Trading GBP/USD Around Jackson Hole
We recommend that derivative traders brace for short-term volatility by using option straddles on GBP/USD ahead of the upcoming Jackson Hole speech. With headline PCE inflation staying sticky at 3.7% year-over-year, any hawkish comments could quickly push the currency pair below the 1.3500 mark. Conversely, a dovish tone could spark a relief rally back toward the recent high of 1.3651.
From a technical perspective, we should view this minor retreat as a buying opportunity since the British Pound is still trading safely above its key moving averages near 1.3410. We advise buying call options on dips toward the 1.3490 support level to capture the broader upward momentum. This setup historically favors buyers, especially with the Relative Strength Index holding a healthy, non-overextended reading around 60.
Fixed-Income Opportunities as Fed Rate Expectations Rise
In the fixed-income space, we can exploit rising rate expectations by shorting December Treasury futures or buying puts on bond ETFs. Money markets have already priced in a dominant 74% chance of a 25-basis-point Fed rate hike by December. This hawkish outlook is heavily supported by robust US economic data, including durable goods orders which doubled expectations to hit a 1.1% monthly gain.
