The GBP/USD pair starts the new week quietly after a rollercoaster of price changes on Friday, staying above 1.3400 during the Asian session. With mixed economic conditions, it’s wise to be cautious about predicting a further rise from its recent low of 1.3250-1.3245, reached last Tuesday. Despite gaining on Friday, the US Dollar struggles to maintain strength due to expectations of interest rate cuts by the US Federal Reserve this year. Other pressures on the USD include fears of a lengthy government shutdown, global trade concerns, and signs of a slowing US economy, which support the GBP/USD pair.

Pound Sterling Sees New Buying Interest

The Pound Sterling has attracted new buying interest around 1.3250 against the USD, pushing the pair closer to 1.3500. Even though there were difficulties earlier, GBP/USD buyers made a strong comeback last week as the USD lost its upward momentum against major currencies. Previously, the Pound faced headwinds from renewed US-China trade tensions and disappointing UK employment data. The UK’s unemployment rate hit 4.8% for the three months ending in August—a four-year high, up from 4.7% in July, according to the Office for National Statistics. Average earnings growth also fell to 4.7% during this time. The Pound is caught in a range between 1.3250 and 1.3500 against the Dollar. Both economies show signs of weakness; the US is slowing, and recent job numbers from the UK were disappointing. This creates a cautious atmosphere in the following weeks. The Dollar’s weakness appears to be the main factor supporting the GBP/USD pair. The recent Non-Farm Payrolls data for September 2025 revealed only 95,000 jobs added—far below expectations—reinforcing market expectations of a Fed rate cut before the end of the year. Futures markets now reflect a 75% chance of a cut in December, adding pressure on the US currency.

Market Dynamics and Trading Strategy

On the Sterling side, the recent rise in UK unemployment to a four-year high of 4.8% complicates matters. However, last week’s UK CPI inflation reading was unexpectedly high at 2.9%, which may limit the Bank of England’s ability to reduce interest rates. The tension between slowing growth and persistent inflation is likely to keep the Pound’s movements unpredictable. Given this uncertainty, we suggest that selling volatility could be a practical strategy over the next two to three weeks. Traders might consider using options to set a range-bound position, like an iron condor, with strikes outside the 1.3200 to 1.3550 range. This could allow for profit as the pair remains directionless, benefiting from time decay. It’s also wise to prepare for a potential breakout, especially with US inflation data coming next week. We recall the sideways market of late 2023, which was eventually disrupted by an unexpected central bank announcement. Thus, holding positions that benefit from volatility, like a simple straddle, could be a smart hedge against a significant price move in either direction. Create your live VT Markets account and start trading now.

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