The Pound Sterling dropped by 0.18% during the North American session on Monday as US-China tensions eased. GBP/USD was at 1.3325 after reaching a daily high of 1.3366. On Monday, renewed tariff threats from US President Donald Trump against China put pressure on GBP/USD, pushing it down to around 1.3330, marking a daily loss of 0.25%. Despite the caution in the market, the US Dollar’s strength made it hard for GBP to recover.

Trading Dynamics And Influences

For the second day in a row, the GBP/USD pair showed a positive trend, trading slightly above the mid-1.3300s during the Asian session. This was driven by softer bets on the Federal Reserve and a positive market mood, which kept the US Dollar weak. Outside GBP/USD, gold reached a record high of around $4,100 due to geopolitical tensions and concerns about a US government shutdown. Meanwhile, US financial markets bounced back with diminished trade tensions, and Dogecoin began to recover after last week’s crash. With mixed signals in play, GBP/USD remained stuck around the 1.33 mark, making straightforward trading challenging. The primary factor affecting this is how the US Dollar reacts to changing geopolitical news, suggesting that using options for trading price fluctuations could be beneficial. We need to stay alert, as market sentiment can shift quickly with a single headline. Currency market volatility has surged significantly, with the Deutsche Bank Currency Volatility Index (CVIX) hitting a 12-month high of 11.5 in early October 2025. This high volatility suggests that traders should consider strategies like long straddles, which can profit from major price moves in either direction, especially before key Bank of England (BoE) speeches. Looking back at the sharp market reactions during the 2018-2019 trade disputes, we know that such headlines can lead to sudden, intense market shifts.

Focus On Bank Of England’s Next Move

The attention on the Pound is closely linked to the BoE’s upcoming decisions, particularly after the recent UK Consumer Price Index (CPI) data for September 2025 showed inflation steady at 2.8%. Any hawkish comments from policymakers this week could boost Sterling. We believe that buying short-dated GBP/USD call options is a smart way to prepare for this potential increase. However, we must also consider the strong US economy, which continues to support the Dollar. The latest Non-Farm Payrolls report revealed a solid addition of 210,000 jobs, leaving the Federal Reserve with less reason to become more dovish. This economic reality supports holding some protective GBP/USD put options to guard against a sudden shift back to the greenback. Create your live VT Markets account and start trading now.

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