Insights 
VT 
The Pound Sterling gained 0.60% against the US Dollar during the North American session on Wednesday, driven by softened US-China trade tensions. GBP/USD was trading at 1.3396, recovering from a low of 1.3309.
US Treasury Secretary Scott Bessent proposed a pause on tariffs on Chinese imports, seeking concessions on China’s export restrictions on rare earths. Federal Reserve Chair Jerome Powell’s dovish comments also impacted the US Dollar, citing labour market weakness and suggesting a move toward neutral interest rates.
Impact Of The US Government Shutdown
In the US, the government shutdown posed risks of increased unemployment rates due to potential federal layoffs. The upcoming Fed Beige Book release is anticipated to provide insights into the economy’s status.
In the UK, Bank of England Governor Andrew Bailey responded to a soft employment report, indicating weakening labour market conditions. The Autumn Budget, expected to indicate tax rises and spending cuts, remains a focus for GBP/USD dynamics.
Despite advancements, GBP/USD’s trajectory could remain bearish unless it breaches the 1.3400 mark, with risks of sliding below 1.3248. Currency performance data reveals GBP lost against most currencies except the New Zealand Dollar this week.
Given today’s date of October 15, 2025, we are seeing a temporary bounce in the GBP/USD pair, which climbed towards 1.3400. This move is primarily driven by US Dollar weakness following dovish comments from Fed Chair Powell and signs of easing US-China trade tensions. However, underlying momentum for the pair remains bearish.
Impact Of Economic Reports
The weakness in the US Dollar appears justified and may persist in the short term. The latest Non-Farm Payrolls report, which showed a gain of only 150,000 jobs against an expected 180,000, confirms the labor market softness that Powell highlighted. If the current US government shutdown continues, it could resemble the 35-day shutdown of late 2018, which would further damage employment data and weigh on the dollar.
This environment suggests that selling call options on the US Dollar Index (DXY) could be a viable strategy to capitalize on further potential downside. Traders might also consider shorting USD futures against currencies with stronger central bank outlooks. The current rally in GBP/USD should be viewed more as a dollar-negative story than a pound-positive one.
On the other side of the pair, we must be cautious about Sterling’s strength, especially with the upcoming Autumn Budget. Chancellor Reeves has confirmed tax hikes and spending cuts are coming, which will act as a headwind for the UK economy. We need only look back to the market chaos following the fiscal event in September 2022 to understand how quickly sentiment on the pound can sour from fiscal tightening.
Therefore, the current strength in GBP/USD could present a strategic opportunity to hedge or position for a reversal. Buying put options on GBP/USD with a strike price below 1.3250 would offer protection against a negative surprise from the budget or a failure to hold the 1.3400 level. This bounce makes entering such protective positions cheaper than it was just a day ago.
Given these conflicting signals, with both currencies facing significant headwinds, volatility is likely to increase. A pair trade, such as going long EUR/GBP, could isolate the pound’s specific weakness ahead of the budget. For GBP/USD, a failure to close decisively above 1.3400 would suggest this rally is short-lived, keeping the path towards the 200-day moving average at 1.3183 open.
