The GBP/USD pair struggled on Monday during the European session, staying below 1.3300. Currently, there are no clear signs of a bullish rebound in the near future. After a drop lasting six days, the GBP/USD saw some recovery due to selling pressure on the US Dollar. However, the Pound quickly fell again, pushing GBP/USD down to a two-month low under 1.3200. Although it recovered sharply on Friday, it still ended the week lower.

US Dollar Recovery

The US Dollar regained strength against major currencies due to positive economic news. This information is for educational purposes only and should not be considered a recommendation to buy or sell. Investors should conduct thorough research before making any decisions as there are inherent risks involved. It’s possible to encounter errors or inaccuracies in this data. Remember, every investment comes with risks, including the potential loss of your investment. The GBP/USD pair is having a tough time finding stability, which matches the lack of bullish signals in the technical outlook. The failure to maintain levels above 1.3300 indicates that sellers currently dominate the market. This situation may present an opportunity for traders expecting further declines. The strength of the US Dollar seems justified, especially after strong economic data released last Friday. The July 2025 Non-Farm Payrolls report revealed that the US economy added 250,000 jobs, well above the expected 190,000. This impressive data supports the Federal Reserve’s current policy, enhancing the dollar’s strength.

Challenges Facing The Pound

In contrast, the Pound faces challenges from a tough domestic economy. Recent mid-July data shows UK inflation stubbornly high at 4.5%, while Q2 GDP figures indicate a slight contraction. This stagflation makes it hard for the Bank of England to act decisively, putting pressure on the Pound. Given this situation, we are exploring strategies that could benefit from a further drop in GBP/USD in the coming weeks. Buying put options for late August or September 2025 appears wise, as this allows us to profit from a decline while clearly outlining our maximum risk. We are particularly interested in put options with strike prices at 1.3200 and 1.3150. If the pair falls below its recent two-month low, these positions may become profitable. Additionally, the sharp recovery on Friday indicates high volatility, making options a better choice than outright shorting futures for some traders. Reflecting on the market turmoil of late 2022 reminds us how quickly the Pound can decline under fundamental pressures. While conditions are not the same, that period witnessed a significant drop in a matter of weeks. This historical context supports our belief that a movement towards 1.3000 is feasible before the end of Q3. Thus, we will be watching the 1.3200 level closely in the short term. A sustained break below this psychological support could lead to more selling pressure. We’ll manage our positions carefully, as unexpected news from the US or UK may alter the current trend. Create your live VT Markets account and start trading now.

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