Sterling slid more than 0.70% against the US dollar on Wednesday, leaving GBP\/USD at 1.3253, its lowest level since 1 July. The move came as US business surveys strengthened and oil prices rose on fears of a US diesel export ban, supporting the greenback. The US Dollar Index (DXY) gained 0.52% and moved above 101.00 for the first time since 30 July.<\/p>\n\n
S&P Global\u2019s flash Manufacturing PMI for September rose to 57, beating a 53.5 forecast and August\u2019s 53.9, while the Services PMI increased from 56.5 to 58.7 and the Composite PMI advanced from 56 to 58.4. Separately, Fed Governor Michael Barr said further rate rises may be required to return inflation to 2%. Money markets lifted the implied probability of an October Fed hike to 70% from 52% a day earlier, according to Prime Terminal. In the UK, S&P Global data showed manufacturing and services expanded but slowed month on month; the diary includes BoE speakers and September GfK Consumer Confidence, while the US schedule features Fed remarks, jobless claims, and commentary from Beth Hammack and Anna Paulson.<\/p>\n\n
We recommend that derivative traders position for continued downward pressure on the GBP\/USD pair in the coming weeks. With the pair slipping below its major moving averages near 1.3476, the medium-term momentum has clearly turned bearish. We should look to sell short-term rallies rather than buying the dip, even with the Daily RSI indicating oversold conditions at 26.<\/p>\n\n
The US Dollar Index has broken above the 101.00 barrier as blockbusting PMIs push October rate hike expectations to 70%. Historical trends show that when the Federal Reserve maintains a hawkish stance while European growth slows, the greenback typically gains an average of 1.8% in the subsequent thirty days. We can exploit this divergence by buying out-of-the-money USD call options.<\/p>\n\n
Additionally, surging crude prices driven by potential US diesel export restrictions are providing a strong tailwind to the dollar. Current global energy data shows middle distillate stockpiles are currently tracking about 8% below their historical five-year average, suggesting oil prices could stay elevated. We advise traders to establish long call options on energy commodities to hedge against inflation-driven dollar strength.<\/p>\n\n
From a technical perspective, any relief rallies toward key overhead resistance at 1.3333 are likely to attract heavy selling. History suggests that oversold readings below 30 often lead to temporary pauses rather than immediate trend reversals. We recommend using GBP\/USD bear put spreads to capture the next leg down while strictly limiting downside risk.<\/p>\n\n\n\n