The Pound Sterling rose against the US Dollar, exceeding 1.3540, thanks to strong retail sales and PMI data from the UK. During the North American session, GBP/USD jumped over 0.31%, trading at 1.3542 after earlier dipping to 1.3482. The currency also climbed to around 1.3536, supported by impressive S&P Global PMI data for January and an uptick in December retail sales in the UK. Additionally, improved risk appetite due to eased US–EU trade tensions contributed to the Pound’s strength, now trading at 1.1357, a 0.24% increase.

Broader Market Movements

In broader market trends, EUR/USD reached yearly highs near 1.1770, propelled by a sell-off of the US Dollar amid a risk-on atmosphere. Gold prices approached $5,000 per troy ounce, supported by the weakening Dollar and fluctuating US Treasury yields. Swiss bank UBS Group is looking into providing Bitcoin and Ethereum services to select clients. The Fed and Bank of Canada are likely to keep interest rates steady due to geopolitical changes, while Bitcoin dipped below $90,000 amid market volatility driven by trade factors. The Pound Sterling’s recent rise above 1.3540 signals strength that we should take advantage of. This movement rests on solid fundamentals, with UK retail sales increasing 0.8% in December 2025 and the flash January PMI hitting 53.1, both exceeding expectations. The UK economy is showing resilience, giving GBP an edge. Given this upward trend, we should think about buying call options on GBP/USD. With the pair reaching four-month highs and nearing 1.3600, targeting strike prices around 1.3700 for late February or March expiration is wise. This strategy allows us to benefit from the ongoing trend while managing our risk.

Dollar Weakness and Commodity Appeal

The key story is the overall weakness of the US Dollar, which has been declining since the last quarter of 2025. This trend is driving gains in everything from EUR/USD to gold. The dollar index has dropped over 4% in the past three months, a significant trend. This downturn is largely due to expectations that the Federal Reserve will hold rates steady, especially after Core PCE inflation for December 2025 decreased to an annual rate of 2.5%. With US inflation easing, there’s little reason for the Fed to adopt a stricter policy that would strengthen the Dollar. This setting makes shorting the Dollar against a range of currencies a promising strategy. This environment helps explain why gold is nearing the psychological threshold of $5,000 per ounce. A weaker Dollar makes commodities priced in USD more appealing to holders of other currencies, leading to strong demand. Historically, periods of significant Dollar decline, like mid-2023, have aligned with robust rallies in precious metals. For traders looking beyond forex, purchasing futures contracts on gold is a straightforward method to engage with this trend. Alternatively, selling put options on gold ETFs can generate income while expressing a bullish outlook. The ongoing weakness of the Dollar creates a strong boost for the entire precious metals sector in the weeks ahead. Create your live VT Markets account and start trading now.

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