GBP\/USD fell about 0.10% on Friday to around 1.3469\u20131.3470 after US inflation data supported the US Dollar and reduced expectations of a dovish Federal Reserve. Middle East tensions also increased demand for the Dollar as a safer asset.<\/p>\n
US core PPI for January rose to 3.6% year on year, above the 3% estimate and December\u2019s 3.3%. Headline PPI eased from 3% to 2.9% year on year, compared with a 2.6% forecast.<\/p>\n
Trade services rose 2.5%, and money markets still price 56 basis points of Fed easing by year-end. The S&P 500 was heading for its worst month since March 2025.<\/p>\n
Reports said the US authorised departures of some embassy personnel and families in Israel and Baghdad. Donald Trump said he had not decided on Iran, and said, \u201cI don\u2019t want to, but sometimes you have to.\u201d<\/p>\n
In the UK, a Green Party win in a Manchester area long held by Labour added pressure on Keir Starmer. Markets price an 84% chance of a Bank of England cut in March, with a 25 basis point move expected.<\/p>\n
Technically, GBP\/USD is capped near 1.3500, with resistance at 1.3530\/1.3560 and support near 1.3450 and 1.3400. Further levels include 1.3360, 1.3300, 1.3630, and 1.3680, with trend lines from 1.3035 and 1.3869.<\/p>\n
The recent jump in the US Producer Price Index to 3.6% reinforces the view that the Federal Reserve will be slow to cut interest rates. This contrasts sharply with the UK, where markets are pricing in an 84% chance of a Bank of England rate cut in March. This growing divergence between US and UK monetary policy should continue to put downward pressure on the GBP\/USD pair.<\/p>\n
This US inflation data is not an isolated event; the most recent Consumer Price Index report also showed core inflation holding firm at 3.4%, well above the Fed’s target. On the other hand, UK inflation just fell to 2.1% in the last report, making it much easier for the Bank of England to justify easing policy. This clear difference in inflation trends supports a stronger dollar relative to the pound.<\/p>\n
Heightened geopolitical risk in the Middle East and a general downturn in risk appetite are also pushing capital toward the safety of the US dollar. We are seeing the S&P 500 have its worst month since March 2025, as the initial excitement around AI seems to be cooling off. This risk-off environment provides another tailwind for the dollar.<\/p>\n
Given this backdrop, we should consider buying put options on GBP\/USD to position for a potential move lower. The technical support levels near 1.3400 and the larger trendline at 1.3360 are key targets. This strategy offers a defined-risk way to profit if the pair breaks down as expected.<\/p>\n
For those expecting a large price swing but uncertain of the direction, the upcoming slate of US data, including Nonfarm Payrolls, is a major catalyst. We could use a long straddle strategy, buying both a call and a put option, to capitalize on a significant volatility spike following these announcements. This would profit from a big move in either direction.<\/p>\n
The area around 1.3530 to 1.3560 is acting as strong resistance for the pair. If we are holding existing long positions, selling call options at these levels could be a prudent way to generate income and provide a partial hedge against a drop. A sustained break below the 1.3360 support line would signal a more significant bearish shift is underway.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD slips to 1.3470 as strong US PPI and Middle East tensions boost Dollar demand.<\/p>\n","protected":false},"author":103,"featured_media":17036,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-50443","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\/50443","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\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=50443"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50443\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17036"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=50443"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=50443"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=50443"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}