GBP/USD rose by 0.59% during the North American session on Monday, trading at 1.3450 after recovering from a low of 1.3374. This increase followed the UK economy’s growth meeting expectations, occurring in thin trading conditions ahead of the Christmas Eve holiday. The Pound Sterling strengthened by 0.45% against major currencies after the release of UK Q3 GDP data, which showed a quarterly growth of 0.1%, matching initial predictions. This led GBP/USD to near 1.3440.

Asian Trading Stability

Before the UK’s Q3 GDP data release, GBP/USD was around 1.3390 after declining for three days. It remained steady during Asian trading hours while the market awaited more UK economic data. In other news, the Dow Jones rose over 200 points ahead of the Christmas holiday. Gold prices climbed past $4,420, up nearly 2%, influenced by geopolitical tensions and possible Federal Reserve actions. Bitcoin and other cryptocurrencies are expected to hit record highs by 2026. Ripple stayed strong above a $1.90 support level with continued institutional interest. The recent rise in GBP/USD above 1.34 primarily reflects weakness in the US Dollar during thin holiday trading. The UK’s 0.1% GDP growth, although meeting forecasts, does not indicate a strong economy, and we remember the stagnation seen in 2024. This rally might be a good chance to consider short positions or buy puts on the Pound, betting that the momentum will slow down when markets stabilize in January.

US Dollar and Market Reactions

The US Dollar is losing strength as the market expects rate cuts from the Federal Reserve early next year. The CME FedWatch tool indicates a strong likelihood of a cut by March 2026, prompting shifts in positions ahead of the holiday. This suggests that shorting the dollar against a basket of currencies or using options to bet on its decline could be a profitable strategy into the new year. Gold’s surge past $4,440 signals market anxiety over geopolitical issues and concerns about the dollar’s value. This trend resembles the flight to safety during significant conflicts, like the early stages of the Ukraine war in 2022. Traders should consider call options on gold ETFs for potential gains while managing risks from possible pullbacks. We should be cautious as these market movements are occurring with very low trading volumes leading into the Christmas holiday. With the VIX around 14, the lack of liquidity means unexpected news could cause sharp price swings. It’s advisable to protect positions with options, like buying puts on equity indices, rather than making large new directional bets. Create your live VT Markets account and start trading now.

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