The GBP\/USD pair rose above 1.3500 due to weakening of the US Dollar, influenced by geopolitical tensions and disappointing economic data. The US Dollar weakened as the US ISM Manufacturing PMI contracted for the tenth consecutive month, decreasing from 48.2 to 47.9 against forecasts of 48.3. <\/p>\n
The Greenback’s performance is reflected in the US Dollar Index, which fell by 0.03% to 98.39. Meanwhile, the concern over the US economy persists, with recent GDP figures showing a 4.3% annualised growth in Q3 and comments about inflation still being high from Minneapolis Fed President Neel Kashkari.<\/p>\n
Geopolitical events, including US actions in Venezuela, affected currency markets over the weekend, supporting the Greenback in Asian and European sessions. Across the Atlantic, interest rate cuts from the Bank of England are expected this year, with money markets pricing in 41.3 basis points of cuts. <\/p>\n
Looking ahead, UK economic data is sparse, while the US is set to release several key economic indicators. The technical outlook suggests potential for GBP\/USD to extend its gains beyond December’s peak. The table provided displays percentage changes of major currencies against each other, with the British Pound showing resilience against the Canadian Dollar.<\/p>\n
With GBP\/USD sitting right on the 1.3500 pivot point, our immediate focus must be the upcoming US Nonfarm Payrolls report. The recent bounce was driven by weak manufacturing data, but the labor market will be the real test for the US Dollar. We should consider using short-dated options to position for a potential spike in volatility around the release.<\/p>\n
Throughout much of 2025, we observed a similar pattern of a resilient US labor market contrasting with a contracting manufacturing sector. For instance, the December 2023 ISM Manufacturing PMI registered 47.4, marking the 14th consecutive month below 50, yet the corresponding NFP report showed a robust addition of 216,000 jobs. This history suggests the upcoming payrolls data could easily surprise to the upside and challenge the current dollar weakness.<\/p>\n
This creates a clear binary risk for the NFP announcement later this week. Given the potential for a significant surprise, buying a GBP\/USD straddle could be an effective way to play a breakout in either direction. The elevated implied volatility reflects this uncertainty, but the realized move could be larger if the data deviates significantly from forecasts.<\/p>\n
On the UK side, while markets are pricing in rate cuts, we must remember how sticky inflation proved to be last year. Looking back, UK CPI fell from its peak but core inflation, which hit 5.1% in the data for December 2023, remained well above the Bank of England’s 2% target. This will likely make the BoE cautious about signaling imminent cuts, potentially limiting pound weakness for now.<\/p>\n
Therefore, the current strength in the pound above 1.3500 may be an opportunity to establish bearish-to-neutral positions. We could look at selling call options with a strike price above the recent 1.3550 high to collect premium, betting that the BoE’s dovish outlook will cap the rally. This strategy benefits if the pair stagnates or falls back below the key 1.3500 level.<\/p>\n
Finally, the geopolitical shock from Venezuela serves as a reminder that headline risk can instantly reverse market sentiment. This event caused a short-lived flight to the safety of the US dollar, and similar events could reoccur without warning. This background uncertainty justifies maintaining some long volatility positions or buying cheap out-of-the-money puts on riskier currencies as a portfolio hedge.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD climbs above 1.3500 as weak US data and geopolitical tensions pressure the Dollar; Pound resilient.<\/p>\n","protected":false},"author":62,"featured_media":17031,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38303","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38303","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=38303"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38303\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17031"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=38303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}