Insights 
VT 
The GBP/USD pair has shown gains for two days, supported by weak Federal Reserve sentiments and a risk-on market approach, weakening the US Dollar. Prices have been around the mid-1.3300s after a recovery from 1.3260, the lowest point since August 5.
Analysts indicate that any further rise in GBP/USD will likely remain within a 1.3290/1.3390 range. They suggest that while downward momentum has slowed, the possibility remains for a GBP decline to 1.3200.
Market Environment
On Monday, GBP/USD fell to around 1.3330, marking a 0.25% daily drop. Strong US Dollar sentiment, spurred by President Trump’s renewed tariffs against China, limited any potential rebound for the pair in a currently risk-off market environment.
The broader context also sees EUR/USD falling below 1.16 due to US-China tensions, while the Australian Dollar recovers slightly amidst easing trade worries. Despite market turbulence, the Canadian Dollar has struggled as the US Dollar hit a six-month high on trade optimism.
From our perspective on October 13, 2025, the Pound is caught between opposing forces, keeping it within a tight 1.3290 to 1.3390 range against the US Dollar. A dovish Federal Reserve is putting pressure on the dollar, but renewed trade tensions are boosting its safe-haven appeal. This suggests that any upward move for GBP/USD is likely to be limited and sold into.
The expectation for two more 25 basis point cuts from the Fed this year is a significant factor weighing on the dollar. Last week’s US Core PCE data, which showed inflation cooling for a third straight month to 2.1%, supports this outlook. This environment should theoretically help the pound, but other factors are preventing a breakout.
UK Fiscal Concerns
At the same time, renewed US-China trade friction is creating a risk-off mood in the markets, pushing capital towards the safety of the US Dollar. This dynamic feels similar to what we saw during the protracted trade negotiations back in 2019, which often led to a stronger dollar despite Fed easing. This helps explain why GBP/USD struggles to hold gains above the mid-1.3300s.
We must also consider the UK’s own fiscal concerns, which are capping sterling’s potential. Recent figures from the Office for National Responsibility showed the UK’s budget deficit widened to 4.2% of GDP last quarter, raising questions about the country’s economic footing. These domestic weaknesses make it difficult for the pound to rally convincingly on its own merits.
The broader market confirms this cautious sentiment, with gold trading above $4,100 an ounce, signaling a clear flight to safety. The drop in EUR/USD below 1.16 is also telling, especially as the latest Eurozone manufacturing PMI registered a contraction at 48.5. This shows widespread dollar strength that is pinning the pound down within its current channel.
For derivative traders, this points toward strategies that profit from range-bound price action and volatility. Selling call options with a strike price near the top of the expected range, around 1.3390, could be an effective strategy to collect premium. Similarly, selling put options near the 1.3290 support level could also be considered, as long as the fundamental picture of conflicting pressures remains intact.
