The Pound Sterling (GBP) dropped slightly by 0.10% against the US Dollar (USD) mainly because there was no new economic data from the UK and strong job reports from the US. Currently, the GBP/USD exchange rate is at 1.3486, having peaked at 1.3516 earlier in the day. During the European trading session on Wednesday, the GBP fell to about 1.3490 against the USD. This decline occurred as the US Dollar strengthened ahead of the release of important US economic reports like the ADP Employment Change and ISM Services PMI for December, along with November’s JOLTS Job Openings.

Currency Movements

Earlier in the day, GBP/USD hit 1.3510 during the Asian trading hours. The pair gained as the US Dollar faced difficulties before the ISM Services PMI and JOLTs job data were released. Other currency movements included a drop in EUR/USD, a stable USD/JPY, and gold prices falling from $4,500 due to strong US data. Also, WTI crude oil saw a decrease as the US increased its influence over Venezuela’s oil supply. We witnessed a similar pattern last year in 2025, with GBP/USD getting stuck around 1.3500 due to a strong US dollar. This situation is becoming more pronounced as markets continue to favor the dollar in a risk-averse environment. There is a strong sensitivity to any signs of strength in the US economy. The latest US jobs report for December 2025 showed a solid increase of over 200,000 jobs, which supports the Federal Reserve’s intention to keep interest rates high. This strong data is a key reason the US dollar has strengthened against the Pound, causing GBP/USD to drop from around 1.35 to about 1.3350 today.

UK Economic Challenges

In the UK, we are facing a tough scenario. Inflation rose to 2.3% in the last quarter of 2025, but growth predictions remain weak. This situation puts the Bank of England in a difficult place, making it less likely to raise interest rates compared to the Federal Reserve. This disparity in policy is a significant challenge for the Pound. For traders dealing in derivatives, this suggests strategies that could profit from either a steady decline or a sudden drop in GBP/USD. Buying put options with strike prices below 1.3300 could be a good way to prepare for further dollar strength in the coming weeks since the cost of these options remains reasonable given the current trend. Implied volatility in GBP/USD options has slightly increased, but not greatly. This indicates that the market expects continued pressure rather than a sharp decline. Thus, selling out-of-the-money call spreads, perhaps with a ceiling around the 1.3500 resistance level we saw last year, could also be a smart strategy. This method profits if the pair remains stable or declines, taking advantage of the lack of upward momentum for the Sterling. Create your live VT Markets account and start trading now.

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