Pound Sterling is trading carefully around 1.3350 against the US Dollar as markets await the Federal Reserve’s monetary policy update. The US Dollar Index remains near its monthly high of 99.00, showing the Dollar’s strength against major currencies. According to UOB Group, the Pound is likely to stay in a range between 1.3315 and 1.3385. Analysts predict potential long-term weakness for the Pound, with a target of 1.3300.

Pound Versus Dollar

The GBP/USD pair has slightly increased, trading around 1.3360, thanks to a weaker US Dollar. This comes after four days of losses and before the expected interest rate decision from the Federal Reserve. The EUR/USD has dipped below 1.1500 following strong US GDP and employment data, boosting the Dollar. Meanwhile, GBP/USD fell below 1.3300 during the day due to the same positive US economic reports. Gold prices are nearing $3,300 as US Treasury yields rise, influenced by strong US economic data. The Bank of Canada plans to keep interest rates steady amid ongoing tariff uncertainties, helping the Canadian Dollar remain strong against the US Dollar.

Fed Decision and Market Strategy

With Pound Sterling around 1.3350, it is in a narrow range as all eyes are on the Federal Reserve. This lull is likely temporary. We expect increased volatility after the announcement. Given the Dollar Index’s high of 99.00, the Pound may be heading downwards. We suggest buying put options on GBP/USD, aiming for a drop below 1.3300 in the coming weeks. Looking back to the major declines in 2022 when the Fed was tightening aggressively, there is clear evidence of weakness for the Pound during similar times. Recent data from July 2025 indicates UK inflation remains high at 4.5%, negatively impacting the Pound’s long-term outlook and supporting our bearish stance. The Euro has also weakened significantly, dropping below the important 1.1500 level due to strong US economic data. Recent US GDP stats for Q2 2025 showed an annualized growth of 2.8%, surprising analysts and increasing demand for the Dollar. This creates a favorable condition for selling EUR/USD futures or buying puts, as a hawkish Fed could push it down to 1.1400. Gold prices are testing a record near $3,300 an ounce, even with rising US Treasury yields. This strength seems more influenced by ongoing geopolitical risks rather than fundamentals, creating a fragile situation at these high levels. If the Fed hints at maintaining higher rates for longer, we might see a sharp correction, making put options on gold a smart hedge against a stronger Dollar. Implied volatility is increasing ahead of the Fed’s decision, which is common before major economic announcements. We can take advantage of this by using strategies like straddles on GBP/USD to profit from significant price movements in either direction. After the announcement, we anticipate lower volatility, which could provide a chance to profit by selling options. Create your live VT Markets account and start trading now.

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