Market Analysis

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Investing Strategy

The recent rise of GBP/USD above 1.3500 is an important signal, fueled by a weakening US dollar amidst geopolitical tensions and disappointing economic data. This should be seen as more than just a temporary spike; it suggests a possible medium-term trend shift. The weak US Non-Farm Payrolls report from last Friday, with only 85,000 jobs added versus an expected 170,000, supports this claim. While the Bank of England has indicated a “gradual downward path” for interest rates following its cut in December 2025, the weak US data is altering the landscape for the Federal Reserve. Markets are now predicting a 75% chance of a 50 basis point cut from the Fed next month, signaling a faster pace of easing compared to the BoE. This growing interest rate gap favoring the pound is a strong reason to be optimistic about the pair. Given this outlook, we recommend buying GBP/USD call options with strike prices around 1.3650 and 1.3700, set to expire within the next one to three months. Geopolitical tensions in Venezuela have increased implied volatility, making options more expensive, but this also indicates potential for sharp upward moves. This strategy allows us to take part in further gains while clearly defining the risks involved. For those with a moderately bullish outlook, selling out-of-the-money put spreads on GBP/USD could be a smart way to earn premium while betting that the pair won’t drop significantly. We noticed that the pair struggled below 1.3200 through much of the third quarter of 2025, so the current level marks a significant breakthrough. This makes former resistance levels a possible new support base. Create your live VT Markets account and start trading now.

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