Insights 
VT 
The GBP/USD pair saw a rebound, trading around 1.3340, driven by speculation of a forthcoming US-UK trade agreement. Reports suggested that US President Donald Trump might announce the deal, potentially boosting the Pound Sterling.
On Wednesday, GBP/USD dropped by 0.6% as markets leaned towards the US Dollar. The Bank of England was anticipated to announce a rate reduction, following the Federal Reserve’s decision to hold interest rates steady.
Impact Of Trade Tariffs
Federal Reserve Chair Jerome Powell indicated that trade tariffs could hinder objectives for inflation and employment. Despite the impact of tariffs on sentiment, the absence of severe economic data makes immediate rate changes challenging for the Fed.
The pair further fell by over 0.2%, trading near 1.3331, amid increased focus on Powell’s press conference. The Federal Reserve maintained interest rates at 4.25%–4.50% and highlighted concerns over rising inflation and unemployment risks.
What we observed in recent trading sessions is a brief uptick in the British Pound, driven largely by speculation rather than confirmed fundamentals. The suggestion that a trade agreement between the US and the UK could be forthcoming gave the Pound a bit of momentum, with GBP/USD moving toward 1.3340. This was short-lived, however, as downward pressure quickly resumed once sentiment shifted back toward the Dollar.
Wednesday’s 0.6% fall confirmed what many had anticipated: the market continues to favour the Dollar in environments where uncertainty lingers and interest rate paths are unclear. The Bank of England was expected to follow the Federal Reserve’s recent decision to hold rates, although with a softer tone due to more sluggish UK economic indicators.
Powell’s remarks – specifically about tariffs harming both inflation and employment targets – caused a stir. There was a moment of reflection across Dollar assets. But that reaction proved restrained because US data, while not exactly shining, hasn’t provided enough weakness to justify immediate action. That leaves rate traders in holding patterns, hesitant to position too strongly in either direction until stronger cues emerge from economic prints.
Market Pricing And Economic Indicators
As soon as Powell took the podium for his post-decision remarks, the Pound saw renewed weakness. GBP/USD dipped lower to around 1.3331, and this tells us something: markets are still weighing the risks more aggressively on the Dollar side. The US central bank kept rates steady at 4.25% to 4.50% and stressed concerns about inflation holding firm while job market risks bubble beneath the surface. It’s these layered trade-offs — cooling price pressures contrasted with labour market vulnerabilities — that we think create a tricky environment for directional trades.
In the days to come, market pricing in rates and even shorter-term option contracts may continue leaning towards USD strength, especially as policy divergence remains less pronounced but still relevant. For now, it’s the absence of forceful data more than any shocking development that limits further movement. Timing is everything, particularly when rate paths on both sides of the Atlantic are not providing enough daylight for conviction.
Derivatives markets should expect thinner conviction until inflation data on either side surprises or employment readings force central bankers’ hands. In the absence of that, we might see implied volatility remain constrained across short maturity tenors. Options skew has loosened slightly in favour of downside GBP exposure, which fits with sentiment but may not invite large positioning unless catalysts appear.
We’re watching UK macro data closely here — wage growth figures or changes in household spending can push expectations one way or another. Any deviation could prolong pricing inefficiencies across short-dated futures and swaps, offering fleeting opportunities for yield-sensitive strategies.
For now, it’s patience and positioning over prediction. Stay anchored to confirmed data, especially around inflation and employment risk premiums. Trust less in headlines about policy speculation and more in the yield expectations underlying futures and forward curves.
