Sterling weakened against the dollar, with GBP/USD down over 0.17% to 1.3343 after earlier touching 1.3387, as the greenback held firm despite reports that Tehran could reopen the Strait of Hormuz if the US meets certain conditions. Price action stayed cautious, and the move reflected a broader bid for the USD rather than any fresh support for the pound.
Earlier gains also unwound after UK data showed public sector net borrowing rising more than expected in August, pushing GBP/USD back below 1.3370 from around 1.3390, though the pair remained within its recent range. In a separate update, the pound was 0.15% higher near 1.3385 during the European session after slipping under 1.3400, with the USD marginally softer ahead of a meeting between US leaders and Gulf nations.
GBP/USD Technical and Macro Outlook
We advise derivative traders to focus on the 1.3400 resistance level for the GBP/USD pair as it fails to hold its ground. The recent decline to 1.3343 shows that the US Dollar remains strong, even with signs of easing geopolitical tensions in the Middle East. We suggest using short-term put options to take advantage of this downward momentum.
This bearish view is backed by weak UK economic data, where public sector net borrowing recently jumped to £13.7 billion, which was £2.5 billion higher than expected. This unexpected borrowing surge has pushed the UK’s total debt to 100% of its gross domestic product (GDP) for the first time since 1961. We believe these shaky government finances will continue to weigh heavily on the Pound in the coming weeks.
Trading Strategies in Light of Dollar Strength
Meanwhile, the US Dollar is holding its value well because global markets still view it as a safe place to put money during times of uncertainty. Historically, when supply chains and major trade routes are threatened, the greenback tends to outperform other major currencies. We recommend setting up options strategies that benefit from a stronger Dollar relative to the Pound.
For tactical trading, we suggest buying bear put spreads to limit the cost of your trades while still positioning for a drop toward 1.3200. Traders should also place tight stop-loss orders just above 1.3420 to protect against any sudden market reversals. Monitoring the upcoming meetings between global leaders will be key to timing these positions.
