GBP\/USD rose to about 1.3520 in early Asian trading on Monday, as the US Dollar weakened amid ongoing uncertainty over US tariffs. Traders are watching the US Producer Price Index (PPI) for January, due on Friday.<\/p>\n
On Friday, the US Supreme Court ruled that Trump\u2019s tariffs were illegal and beyond his authority. Trump then imposed a blanket 15% levy on imports, with Reuters reporting the replacement tariffs last for 150 days.<\/p>\n
Reuters also said it is unclear whether the US must refund importers for duties already paid, as the court did not rule on that point. The pair had fallen the prior week, breaking out of a consolidation range and revisiting levels last seen in late January.<\/p>\n
GBP\/USD tested below 1.3450 as the Dollar strengthened through the week. Moves in the pound were linked to differing policy expectations between the Bank of England (BoE) and the US Federal Reserve (Fed).<\/p>\n
UK jobs and inflation data supported expectations of a BoE rate cut next month. ONS data showed unemployment reached 5.2% in the last three months of 2025, while average pay growth slowed to 4.2% from a revised 4.4% in the three months to November.<\/p>\n
The current bounce in GBP\/USD towards 1.3520 seems driven by immediate confusion over the new 15% US import levy. This tariff uncertainty is causing short-term selling pressure on the US dollar. However, we see this as a potential opportunity to position for the pound’s underlying weakness.<\/p>\n
Looking back at the end of 2025, the UK jobs report showed unemployment hitting a five-year high of 5.2% and slowing wage growth. This weak data, combined with the fact the UK technically entered a recession in the second half of 2025, strongly signals a Bank of England rate cut is coming next month. This makes holding long positions in the pound fundamentally risky.<\/p>\n
On the other side, the Federal Reserve faces a different problem, as US core inflation remains stubborn. Recent statistics showed January’s Consumer Price Index (CPI) at 3.1%, resisting a quick return to the Fed’s 2% target. This divergence, with the BoE set to cut rates while the Fed holds, should favor the dollar over the pound in the medium term.<\/p>\n
Given the competing factors, we should prepare for increased volatility. The options market is already pricing this in, with one-month implied volatility for GBP\/USD jumping to over 9% from the 6% range seen last month. Buying put options on GBP\/USD could be a prudent strategy to gain downside exposure while capping risk ahead of Friday’s US PPI report.<\/p>\n
We saw similar periods of tariff-induced volatility back in 2018 and 2019, which often led to sharp, unpredictable swings. These swings make outright short positions risky, reinforcing the case for using options. Traders could consider bearish option structures, like a put spread, to cheapen the cost of the trade while targeting a move back towards the 1.3400 level.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD climbs near 1.3520 as dollar weakens on tariff uncertainty; traders await Friday\u2019s US PPI data.<\/p>\n","protected":false},"author":62,"featured_media":17033,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42541","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\/42541","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=42541"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42541\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17033"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}