Geopolitical Risk Drives Dollar Demand
US Initial Jobless Claims for the week ending March 21 were 210K, matching expectations and up from 205K. Markets also watched planned remarks from Fed officials Lisa Cook, Stephen Miran, Philip Jefferson, Michael Barr and Dallas Fed President Lorie Logan. In the UK, GfK Consumer Confidence for March was expected to worsen to -24 from -19. Markets also weighed the risk of higher fuel costs alongside slower activity and steady or higher interest rates. Technically, GBP/USD faced resistance near 1.3430 and around 1.3500. Support was near 1.3340, with further support near 1.3220 if the pair fell. We remember the situation well back in 2025, when GBP/USD was struggling around 1.3360 amid serious geopolitical tensions. Fast forward to today, March 26, 2026, the pair is trading lower near 1.2850, showing that the underlying strength in the US dollar has persisted. The acute Mideast crisis of last year has passed, but its effects on the market’s risk perception are still felt.Oil Fed Policy And Gbpusd Trend
The intense oil spike to over $93 a barrel that we saw in 2025 was a key driver for the dollar’s safe-haven appeal. While WTI has since moderated to around $82 a barrel, the US Dollar Index remains elevated at 101.50, well above the 99.77 level seen during that period. This shows the market is still pricing in a premium for the dollar due to ongoing inflation concerns and a relatively hawkish Federal Reserve. Last year, the US labor market was very tight, with jobless claims around 210K, allowing the Fed to focus squarely on inflation. We’ve seen a slight softening since then, with recent weekly claims averaging closer to 235K, but this has not been enough to fully ease the Fed’s concerns. The stagflationary scenario that loomed in 2025 remains a credible threat, forcing the Fed to maintain a cautious stance. In the UK, the expected deterioration in consumer confidence we were watching in 2025 has materialized and worsened. The GfK index didn’t just fall to -24; recent readings for March 2026 show it hovering near -28, reflecting persistent cost-of-living pressures. This leaves the Bank of England in a difficult position, unable to support the economy without risking further inflation, which continues to weigh on the Pound. The technical picture has evolved significantly since last year’s analysis. The support level at 1.3340 has long been broken and now acts as a significant resistance area, illustrating the bearish trend that has taken hold. For traders, this suggests that selling into any rallies remains the favored strategy, with put options offering a clear way to position for further downside. Buying puts with a strike price around 1.2700 could provide protection against a break of the recent lows. Create your live VT Markets account and start trading now.
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