Insights 
VT 
The Pound Sterling rose by 0.26% against the US Dollar as the US government shutdown entered its third day, affecting economic data releases such as the Nonfarm Payroll figures for September. The GBP/USD was trading at 1.3471, after rallying from lows of 1.3427, influenced by Purchasing Managers Index (PMI) data from S&P Global and ISM in the US.
During the European session, the Pound Sterling maintained a stable range around 1.3440 against the US Dollar due to a lack of fresh economic cues stemming from the partial government closure. The US Dollar showed weakness as markets adjusted to the absence of critical economic data, contributing to GBP/USD consolidation.
Market Trends In Asia
In Asia, GBP/USD gained modestly to around 1.3435 as the US Dollar weakened while the American job market showed signs of slowing amid the government shutdown. While the Nonfarm Payrolls report for September was postponed, the release of ISM Services PMI, and the S&P Global Services PMI was expected later in the day. Meanwhile, reactions to the US shutdown continued to shape market trends, with traders assessing its broader economic impact.
With the US government shutdown now in its third day, we are seeing predictable weakness in the dollar as key data like the Nonfarm Payrolls is delayed. This creates a data vacuum, making it difficult to gauge the Fed’s next move and increasing short-term volatility. This environment suggests that buying options, such as straddles or strangles on GBP/USD, could be a prudent way to trade the uncertainty without picking a firm direction.
We should remember that past shutdowns, like the 16-day closure back in October 2013, created similar data gaps but were ultimately temporary. Once a resolution was reached, market focus quickly snapped back to economic fundamentals, often leading to a reversal of the initial dollar weakness. Therefore, selling USD call options with short-term expiries could be a way to capitalize on a potential snap-back once Congress reaches a deal.
Policy Divergence Between Fed And Bank Of England
Beyond the shutdown, the key driver for GBP/USD remains the policy divergence between the Fed and the Bank of England. Looking back, we saw UK inflation remain stickier than hoped through 2024, keeping the Bank of England on a hawkish footing, while US core PCE struggled to fall below 2.5%, prompting the Fed to start its cutting cycle earlier this year. This fundamental backdrop supports owning long-dated GBP/USD call options to maintain exposure to the longer-term uptrend.
Gold’s rise toward $3,890 is a classic flight-to-safety move fueled by both the shutdown and the growing prospect of more Fed rate cuts. This dual support makes gold an attractive asset in the coming weeks. Traders could consider buying gold futures or using bull call spreads on gold ETFs to profit from further upside while limiting risk.
The strength we are seeing in assets like Bitcoin, which is holding near $120,000, reflects bets that the shutdown will force the Fed’s hand toward more aggressive rate cuts. This creates a divergence, with some assets reacting to risk-off sentiment and others to dovish policy expectations. Given this, protective put options on crypto-related equities could be a wise hedge against any sudden shift in Fed messaging back toward a hawkish stance.
