Sterling rose by over 0.20% against the US Dollar on Tuesday, with GBP\/USD near 1.3241 and still above its opening level. Risk sentiment weakened as ceasefire talk faded and the chance of a US attack rose as Donald Trump\u2019s deadline neared.<\/p>\n
The US Dollar Index (DXY) fell 0.14% to 99.84 as oil prices climbed. The US attacked Kharg Island, and Iran responded against US interests in the United Arab Emirates, Iraq and Saudi Arabia.<\/p>\n
Reports said US\u2013Iran talks were closed, while the Tehran Times said they were not closed. In US data, Durable Goods Orders fell 1.4% in February for a second month, versus forecasts for a 0.5% decline, while core goods rose 0.8% month on month versus 0.5% expected.<\/p>\n
New York Fed President John Williams said an energy shock may lift inflation, with headline inflation expected to rise 2.75% this year. The New York Fed survey showed one-year inflation expectations at 3.4% (from 3%), three-year at 3.1% (from 3%), and five-year unchanged at 3%.<\/p>\n
In the UK, the S&P Global Services PMI fell to 50.5 in March from 53.9, an 11-month low, while input prices rose. GBP\/USD later trimmed gains as the Dollar recovered.<\/p>\n
Looking back at the events of early 2025, we recall the intense focus on geopolitics, with GBP\/USD trading above 1.3200 amid fears of a US attack on Iran. Today, the landscape is markedly different as the direct military risk premium has faded from the market. The pair is now trading significantly lower, reflecting a shift in focus back to economic fundamentals.<\/p>\n
The stagflationary concerns from March 2025, when the UK Services PMI fell to an 11-month low, have evolved into a persistent inflation problem. With UK inflation recently reported at 3.2% for March, well above the Bank of England’s 2% target, the market expects interest rates to remain elevated. This suggests selling call options on GBP\/USD could be a viable strategy to capitalize on a capped upside, as the BoE has little room to become more hawkish.<\/p>\n
In 2025, we saw the New York Fed expecting inflation to hit 2.75%, but the reality has been more stubborn, with the latest US CPI print coming in at 3.5%. This persistence keeps the Federal Reserve in a restrictive stance, limiting the US dollar’s downside. The economic divergence between a struggling UK and a resilient US economy continues to favor dollar strength against the pound.<\/p>\n
The high implied volatility seen during the 2025 US-Iran escalation has subsided significantly, with the VIX now hovering in the mid-teens compared to the spikes we saw then. This lower volatility environment makes options cheaper, presenting an opportunity to buy puts on GBP\/USD as a cost-effective way to speculate on a further decline. The rising trendline support near 1.3100, which held in 2025, was decisively broken months ago, signaling a clear long-term bearish trend.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Sterling gained 0.2% near 1.3241 as Middle East tensions rose; weak US data pressured dollar.<\/p>\n","protected":false},"author":103,"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-46943","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t