Sterling Recovery

Pound Sterling (GBP) rose for the second day in a row against the US Dollar (USD), gaining 0.2%. It regained the 1.3400 level, with UK Gross Domestic Product (GDP) data expected on Tuesday. Analysts predict that UK GDP will stay at 0.3% for the quarter and 1.2% for the year. Any changes from these forecasts could make the Pound more volatile. In the US, the Nonfarm Payrolls data is also on the way, amid concerns over a potential government shutdown. Sterling is bouncing back from recent lows, but it faces challenges ahead. The 50-day Exponential Moving Average around 1.3480 is a point of resistance. The GBP/USD pair could hit barriers at 1.3500. Pound Sterling is a key global currency, making up 12% of foreign exchange trades. Its main trading pairs include GBP/USD, GBP/JPY, and EUR/GBP. The Bank of England issues it, and its value is influenced by interest rate policies. Indicators of economic health and decisions on monetary policy affect the GBP’s worth. Strong data can boost GBP’s prospects, while weak data may do the opposite. The Trade Balance also plays a role; positive balances help strengthen the currency. FXStreet recommends thorough research before making any investment decisions, as there are risks involved.

GBP/USD Performance

GBP/USD is climbing for a second day, surpassing the 1.2700 level as the US Dollar weakens. The US Dollar Index (DXY) recently dropped below 103.00 for the first time in two months, giving the Pound some room to grow. This shift comes as traders assess different central bank views ahead of important data this week. Looking ahead, we are focusing on the final UK GDP numbers for the third quarter. The market anticipates a modest increase of 0.1%, reflecting the slow growth we’ve experienced throughout 2025. Any surprise in these figures could lead to sharp movements in the Pound. The biggest risk this week is the US Nonfarm Payrolls (NFP) report, with economists predicting an addition of 170,000 jobs. However, there’s a concern about political gridlock in Washington, which could result in a government shutdown by the end of the week. A shutdown may delay this crucial data and create uncertainty in the market. This gradual recovery began when the Pound found strong support near 1.2550 last week. Now, with GBP/USD trading above 1.2700, there is notable technical resistance at the 50-day moving average, close to 1.2780. Traders using derivatives should be mindful of this limit, as it could halt the current upswing. The main driver here is the outlook for monetary policy from the Bank of England (BoE) compared to the US Federal Reserve. The BoE seems to be maintaining a tight approach, as UK inflation remains stubbornly above its 2% target, even after peaking above 11% in 2022. Meanwhile, weak US data is leading some investors to expect more Fed rate cuts in early 2026. With the GDP and NFP data upcoming, we predict increased volatility, which presents opportunities for derivative traders. Options strategies like straddles or strangles can be used to capitalize on potential price swings without committing to a specific direction. The implied volatility for one-week GBP/USD options has already risen to 8.5% in anticipation. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now