GBP/USD bounced back, trading above 1.3450 on Friday after struggling earlier. This recovery was driven by better market sentiment and lower US consumer inflation expectations, which weighed on the US Dollar.

Cryptocurrency Market Update

In the cryptocurrency world, Bitcoin is currently trading above $120,000, close to its all-time high of $123,218. Ethereum has surged more than 20% this week, aiming for the $4,000 level. Ripple has also hit a new high at $3.66, showing growing demand and optimism in the market. China reported a 5.2% year-on-year growth in the second quarter, which beat expectations. However, drops in fixed investments, retail sales, and falling property prices raise concerns about a possible economic slowdown. We see the recent weakness in the US Dollar as an opportunity. The latest US Consumer Price Index revealed that overall inflation has cooled to 3.2% year-over-year. This supports the idea that the Federal Reserve may stop raising interest rates. As a result, we’re thinking about buying near-term call options on GBP/USD to benefit from a potential rise toward the 1.3500 level.

Global Market Concerns

That said, we should be cautious about the ongoing weakness in the British economy. Recent data from the Office for National Statistics shows that UK wage growth is slowing, and the unemployment rate has increased to 4.2%. This confirms our concerns about the labor market, making it risky to hold long positions. Using options with a clear downside limit is a smarter approach. The overall market’s risk appetite seems robust, which favors currencies like the pound over safe havens. The Crypto Fear & Greed Index is currently at a “Greed” level with a score of 72, reflecting the optimism around assets like Ethereum. Historically, such eagerness in speculative assets often leads to strength in other risky financial instruments. Despite this positive sentiment, we remain alert to the warning signs from China. While the growth figure is strong, youth unemployment is still a significant issue, and the property sector crisis looms, with major developers like Country Garden missing debt payments. A major global slowdown from China could trigger a rush to the safety of the dollar, quickly undermining any bullish positions on the pound. Create your live VT Markets account and start trading now.

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