The GBP/USD is on the rise during the North American session, currently at 1.1357, a gain of 0.24%. This increase is due to improved risk appetite after easing tensions in the US-Europe trade conflict. Despite strong economic data from the US, the USD has not strengthened, allowing the GBP to gain. During the European session, the Pound Sterling is performing well against most major currencies. This is supported by the UK’s Consumer Price Index (CPI), which rose more than expected in December. The GBP/USD pair is now trading above 1.3400, aided by unexpected inflation in the UK.

Global Market Trends

In other markets, Japan’s national CPI rose by 2.1% year on year in December. New Zealand’s CPI inflation reached 3.1% year on year in the fourth quarter. Australia’s S&P Global Manufacturing PMI increased to 52.4 in January. The Bank of Japan is likely to keep interest rates steady, with traders looking for signs of future tightening. Gold prices continue to soar, surpassing $4,900 per troy ounce, mainly due to a weakening USD. In the cryptocurrency market, Chainlink is experiencing bearish pressures with increased volatility, while Ripple is holding steady above the support level of $1.90. Overall, markets are reacting to changes in geopolitical and economic factors. With the current trends, we expect the Pound Sterling to continue strengthening against the US Dollar. The rise above 1.3400 is linked to a positive outlook from the US-EU trade developments and a weaker dollar. This indicates that traders might want to adopt strategies that benefit from further gains in GBP/USD in the short term.

GBPUSD Trading Strategy

Recent UK inflation data for December 2025 showed a rise to 3.5%, exceeding the 3.2% expectation. This persistent inflation has led the markets to rule out any potential rate cuts by the Bank of England in the first half of 2026, supporting the Pound’s value. Historically, periods of ongoing inflation have often resulted in strong currency values when central bank policies are kept tight. On the flip side, despite strong US domestic data, such as the Non-Farm Payrolls report which added 250,000 jobs, the US Dollar is weakening. This indicates that global risk sentiment is currently more influential than expectations for Federal Reserve policy. Thus, we should consider short-dollar positions against a range of currencies, not just the Pound. For traders in derivatives, this market is ideal for bullish strategies on GBP/USD. We’re seeing one-month implied volatility rise to around 10%, up from the 7% lows at the end of last year, which makes long options pricier. Therefore, consider bull call spreads targeting a move towards 1.3550 to keep costs manageable while taking advantage of the upward trend. Looking ahead, the flash PMI data coming out this Friday will be a key factor. A strong UK services PMI and a weaker US reading would support the current trend and possibly push the pair higher. However, we must stay alert, as any unexpected changes in the US-EU trade situation could quickly affect these positions. Using defined-risk options strategies could be wiser than futures in such uncertain times. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now