The GBP/USD currency pair is on the rise, getting close to important levels at 1.3588 and 1.3618. This upward movement is fueled by a weaker US dollar and UK job data that doesn’t push the Bank of England to cut interest rates soon. After breaking the key 1.3500 level, GBP/USD rose about 0.5% on Tuesday and stayed above 1.3550. Even with signs that the currency might be overbought, a drop could be pushed back if market sentiment remains strong.

The US Dollar and Inflation Data

The decline of the US Dollar has helped GBP/USD to climb. Recent US inflation data matched market expectations that the Federal Reserve will take a softer approach to policy for the rest of the year. It’s important for users to do their own research before trading foreign currencies, as it can be risky. Leverage can increase both potential gains and losses. If needed, seek financial advice. All risks, losses, and investment costs, including total loss of principal, are the responsibility of the user. The Pound Sterling is gaining strength against the US Dollar, now testing levels above 1.3550. This rise is due to a weaker dollar and positive UK economic data. The latest UK jobs report from early August 2025 shows unemployment steady at a low 3.8%, giving the Bank of England little reason to cut rates anytime soon.

Strategic Considerations for Traders

The US Dollar’s drop is driven by market expectations of a more cautious Federal Reserve. This was confirmed when the US inflation rate for July 2025 fell to 2.9%, solidifying the view that the Fed will likely keep rates steady for the rest of the year. This vibe is boosting currencies like the Pound. Since the pair is technically overbought, a simple long position could be risky because of a potential sharp pullback. Instead, traders may want to consider buying call options. This can help limit losses while still allowing participation in any further gains toward the 1.3618 resistance level. This strategy lets traders profit if the bullish trend continues while also keeping risks in check if prices fall. Caution is advised because this type of policy divergence can lead to market volatility. For example, in late 2021, similar expectations for the Fed and the Bank of England caused erratic price movements before a clear trend emerged. So, any positions should be managed with protective stops or defined-risk options. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now