The Pound Sterling rose in the North American session while the US Dollar stayed flat, as uncertainty over US trade policy weighed on sentiment. GBP/USD traded at 1.3523, up 0.29%.
Markets were focused on an earnings report due after the Wall Street close. The report was expected from one of the seven megacap companies.
Policy Divergence Supports Sterling
The Pound is holding near 1.35, a big move up from the ranges seen through most of 2025. Much of this strength comes from the Bank of England keeping rates higher for longer to fight the persistent inflation seen last year. By contrast, the US Federal Reserve started cutting rates in late 2025. This policy gap supports Sterling.
The US Dollar is also being held back by uncertainty around the new US trade frameworks introduced after the elections. Volatility is rising too: implied volatility on Sterling options, measured by the BPVIX index, reached a six-month high of 9.8% last week. In this kind of market, it may make more sense to trade the bigger price swings than to rely on a simple one-way view.
For traders looking for more Sterling strength, buying GBP/USD call options expiring in 45 to 60 days can capture upside while keeping risk defined. The setup looks similar to Q3 2025, when a comparable central bank split led to a sharp rally. A bull call spread can reduce the premium paid, which matters with volatility currently elevated.
Still, the rally may be stretched. The 1.3550 level has often been strong resistance. The latest CFTC data also shows non-commercial net long Pound positions at the highest level in more than two years, which suggests the trade is getting crowded. Traders concerned about a pullback could consider buying out-of-the-money put options to hedge against a sudden drop.
Key Risks And Positioning
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