Insights 
VT 
The GBP/USD pair pulled back on Friday after reaching a weekly high of 1.3471. This decline followed US President Donald Trump’s comment on the unsustainability of elevated tariffs on China, leading to gains for the US Dollar, with the pair trading above 1.3415, down by 0.12%.
During the European session on Friday, the Pound traded steadily around 1.3470 against the US Dollar. Even though the US Dollar Index faced selling pressure, this situation indicated underlying weakness in the British currency.
Positive Traction in Trading
For the third consecutive day, the GBP/USD pair gained positive traction, moving away from its early-August lows of around 1.3250-1.3245. Despite reaching the mid-1.3400s—marking a one-and-a-half-week high—the rise lacked strong upward momentum amid a generally weaker US Dollar.
In related financial news, EUR/USD slipped following Trump’s easing of China’s tariff stance. Meanwhile, the Dow Jones Industrial Average attempted a bullish move and the Canadian Dollar rebounded. Gold experienced a 2% drop amid softened threats on China, and USD/JPY strengthened on heightened US Dollar demand.
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Looking back, we see how comments on China tariffs could swing GBP/USD around the 1.34 mark during the Trump administration. Today, on October 17, 2025, the landscape is entirely different as the pair struggles to hold the 1.2250 level. The focus has shifted from trade rhetoric to the deep divergence between central bank policies.
Shifting Focus in Currency Markets
We can see that dovish Bank of England expectations were a major theme years ago, weighing on the Pound. Now, the situation has reversed as we grapple with persistent inflation, even as the latest ONS data showed the Consumer Price Index cooling to 3.1% in September. This forces the BoE to maintain its hawkish stance, creating volatility for interest rate swaps and short-term GBP options.
The US Dollar is also facing a different set of pressures compared to the tariff-driven moves of the past. Recent Non-Farm Payrolls data showed a significant slowdown, with only 150,000 jobs added last month, suggesting the Federal Reserve’s tightening cycle has taken full effect. This introduces weakness and makes long-dollar positions less certain than they were.
For the coming weeks, we should consider strategies that benefit from this uncertainty rather than betting on a clear direction. A long straddle on GBP/USD, which involves buying both a call and a put option, could be a viable way to play a potential breakout ahead of the next central bank meetings. Implied volatility remains relatively low compared to the highs we saw during the economic turmoil of 2024, making such options strategies more affordable.
