The British Pound (GBP) has suddenly risen against the US Dollar (USD), reaching its highest point in three years. On Friday, GBP/USD went above 1.3500, trading at around 1.3538, which marks an increase of nearly 0.80% during the American session. This increase is mainly due to a weaker US Dollar and unexpectedly strong UK Retail Sales data. During European trading hours, the Pound (GBP) gained value after the impressive UK Retail Sales figures for April were released.

Asian Trading Session Impact

Earlier on Friday, GBP/USD rose about 0.25% during Asian trading hours, hitting around 1.3450. This gain was supported by better-than-expected UK Consumer Confidence Index data from GfK. Traders keep an eye on UK Retail Sales figures, anticipating a drop for the third month in a row in April. The tools and markets mentioned here are for informational purposes only and are not recommendations. All investments carry risks, so it’s crucial to do thorough research. The Pound has made a significant jump, reaching levels not seen in nearly three years. By the end of New York’s Friday session, it crossed the 1.3500 threshold against the dollar, briefly hitting 1.3538. This quick move surprised many. The main reasons for this rise are the weakness of the dollar and the unexpected strength in the UK retail sector. To understand this movement better, we see that the dollar has been weakening. Markets are pulling back from expecting further tightening by the Federal Reserve, as US inflation data hasn’t consistently supported another rate hike. This has reduced the dollar’s demand. Meanwhile, the UK showed a solid rise in retail activity, with April’s figures exceeding expectations. The improvement in consumer sentiment, highlighted by the GfK report, explains the Pound’s momentum.

Derivatives And Positioning

Earlier on Friday, in both Asia and London sessions, initial gains were setting the tone. The Sterling steadily increased before US trading volumes came in. GfK’s Consumer Confidence Index improved, defying forecasts of another dip due to ongoing inflation and rising mortgage costs. This increase has boosted trader confidence that UK consumers may be handling cost pressures better than previously thought. This creates an intriguing situation for those involved in derivatives. Cable’s rise is due not just to the strength of the Pound but also the weakness of the dollar. Understanding the main driver is essential for positioning. If the dollar’s influence remains dominant, broader DXY-based flows may impact this pair moving forward. However, if UK retail data continues to be strong—and is supported next week by labor or inflation data—this suggests the Pound may remain strong longer than previously expected. From our perspective, short-term volatility appears undervalued, especially with the data calendar staying busy. Directional strategies based on upcoming CPI reports or interest rate discussions could still be valuable. The three-year high hit on Friday was not just technical resistance; it was a psychological barrier crossed under dynamic market conditions. Next week’s liquidity may exaggerate price movements further. The price actions leading into Wednesday’s BOE statement will be even more crucial than usual. It’s also important to note the sentiment shift this week. Many traders had positioned themselves differently leading up to Friday. This created an opportunity for a short-covering spike when economic data differed from market expectations. If this change in sentiment continues, monthly options connected to the Pound could see increased activity towards higher deltas. However, we also need to monitor weaker UK macro releases closely. A surprise shift in consumer behavior or a drop in PMI could negate this bounce. For now, flows seem supportive post-retail, but sentiment will depend on how pricing power and employment perform. Overall, recent market actions have been influenced by solid data—retail and confidence levels—rather than vague macro interpretations. This offers a clearer trigger system for upcoming data releases. Traders will likely focus on rebalancing after a week that pushed the Sterling higher than expected. The market reactions to the unexpected resilience in the UK have been significant, so we shouldn’t anticipate slow changes from here. Create your live VT Markets account and start trading now.

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