Insights 
VT 
The GBP/USD pair begins the new week quietly following volatile price movements on Friday, maintaining levels above 1.3400 in the Asian session. A mixed fundamental backdrop suggests caution before predicting a continuation of the recent recovery from its lowest level since early August, found between 1.3250-1.3245 last Tuesday.
The US Dollar is struggling to gain momentum despite Friday’s gains due to expectations of more interest rate cuts by the US Federal Reserve this year. Additional pressures on the USD include the risks of a prolonged US government shutdown, global trade issues, and signs of weakness in the US economy, all helping to support the GBP/USD pair.
Pound Sterling Fresh Buying Interest
The Pound Sterling has drawn fresh buying interest around the 1.3250 mark against the USD, moving the pair towards the 1.3500 level. Despite initial challenges, GBP/USD buyers made a strong return last week as the USD lost upward momentum, suffering losses against its major currency counterparts.
Earlier, the Pound faced challenges due to renewed US-China trade tensions and weak UK employment data. The UK Unemployment Rate reached 4.8% in the three months to August, a four-year high, according to the Office for National Statistics, up from 4.7% in July. Average Earnings growth in the same period fell to 4.7%.
The Pound is struggling to find a clear path against the Dollar, caught between 1.3250 and 1.3500. We see weakness in both economies, with the US showing signs of a slowdown while the UK’s recent job numbers were disappointing. This creates a cautious environment for the next few weeks.
The Dollar’s weakness seems to be the main driver offering support here. The latest Non-Farm Payrolls data for September 2025 came in at a disappointing 95,000, well below forecasts and reinforcing the market’s expectation of a Fed rate cut before year-end. We see futures markets now pricing in a 75% probability of a cut in December, keeping pressure on the US currency.
Market Dynamics and Trading Strategy
On the Sterling side, the situation is also complicated by the recent rise in UK unemployment to a four-year high of 4.8%. However, last week’s UK CPI inflation reading came in hotter than expected at 2.9%, which may limit the Bank of England’s ability to ease policy. This conflict between slowing growth and sticky inflation is likely to keep the Pound’s movements choppy.
Given this uncertainty, we believe selling volatility could be a viable strategy over the next two to three weeks. Using options to establish a range-bound position, such as an iron condor with strikes outside the 1.3200 to 1.3550 range, could allow traders to profit from the pair’s current lack of direction. This approach benefits from time decay as long as the market remains stuck.
We must also be prepared for a potential breakout, especially with US inflation data due next week. We remember the choppy sideways market of late 2023, which was eventually broken by a surprise central bank announcement. Therefore, holding long volatility positions, like a simple straddle, could be a prudent hedge against a sharp move in either direction.
