The Pound Sterling has gained strength against the US Dollar, reaching close to 1.3440 after the UK released its GDP figures. The UK economy grew by 0.1% in August, which helped boost the Pound, while the US Dollar remains weak. Recently, GBP/USD bounced back to 1.3400 after dipping near the 200-day Exponential Moving Average around 1.3290. The ongoing US government shutdown has disrupted the regular release of economic data, and multiple economic updates from the UK are expected soon.

Global Economic Scenarios

The FXStreet Team highlights different macroeconomic events that are influencing global economic conditions. They cover central banks, market indexes, currencies like USD/JPY, and commodities such as gold. They also discuss a wide range of topics and provide future broker recommendations for 2025. FXStreet warns that the information shared carries potential risks and uncertainties, advising thorough research before making any investment decisions. The platform states that it cannot provide investment advice or take responsibility for investment outcomes based on the information provided. They emphasize that neither FXStreet nor its authors will be liable for any financial losses or issues faced by users. The Pound Sterling is currently stronger against a declining US Dollar, rising above the 1.3400 level. This change is mainly driven by expectations that the US Federal Reserve will reduce interest rates, rather than just the UK’s modest 0.1% GDP growth. The ongoing US government shutdown adds to the dollar’s weakness by stopping essential economic data releases, leading to uncertainty.

US Inflation Trends

We see this as part of a trend where US inflation, which peaked over 9% in 2022, has cooled enough for the Fed to consider easing its policies. This is different from the UK’s situation, where economic data has shown slow growth, similar to the near-stagnation often seen in 2024. Thus, the movement in this currency pair is mainly a reflection of the US situation rather than a sign of overwhelming strength in the Pound. In the upcoming weeks, we could see GBP/USD trend higher, possibly reaching the 1.3500 level. Buying call options with strike prices around 1.3450 may be a good way to take advantage of this trend with limited risk. The premium on these options is likely high due to uncertainty, but the dollar’s weakness should keep things favorable for now. However, the situation is delicate, as government shutdowns, like the one in 2018, can end suddenly. A quick resolution could lead to a sharp reversal, so buying protective put options below the recent 1.3290 support level is a wise strategy to safeguard long positions. This will help protect against a rapid rebound in the dollar once economic data resumes. Currently, trading volatility is an intriguing option. Implied volatility in GBP/USD options has probably increased, reflecting the uncertainty caused by the US data blackout. Selling out-of-the-money puts could allow you to collect premium and bet that the pair won’t drop significantly while the dollar remains under pressure from expectations of rate cuts. Create your live VT Markets account and start trading now.

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