The Pound Sterling has dropped to about 1.3540 against the US Dollar, down from a high of 1.3600. Optimism about a possible US-EU trade deal has strengthened the US Dollar, with the Dollar Index rising to nearly 99.35 from a previous low of 98.70. The US President stated on Truth Social that the EU is eager to schedule meetings quickly. While there’s some hope, uncertainty still lingers about the effects of US trade deals, as Federal Reserve officials worry about stagflation risks.

Durable Goods Order Impact

In the US, durable goods orders fell by 6.3%, following a rise of 7.6%. Analysts had predicted a drop of 7.9%, indicating a weaker economy. In the UK, there’s an expectation of a slight easing in the Bank of England’s monetary policy. This is due to strong GDP growth, a Consumer Price Index rise to 3.5% year-on-year, and encouraging retail sales data. The Pound Sterling remains strong against most major currencies, except for the US Dollar. It stays above all short- and long-term EMAs, showing a bullish trend, as indicated by the 14-day RSI near 70.00. As the Pound gives up some value against the Dollar, staying at 1.3540 instead of pushing higher from 1.3600, we’re monitoring the factors driving this fluctuation. The rise in the Dollar Index—from 98.70 to nearly 99.35—indicates that excitement over a potential US-EU trade deal is boosting confidence in the Dollar. This is typical, as markets often move ahead of actual developments. However, assuming that expressed intentions will turn into actions carries some risk. When the President suggested online that talks with the EU could be scheduled soon, it gave the Dollar an extra push. But no agreements are in place yet. Markets tend to react to both sentiment and data. While traders showed optimism, some caution is taking shape beneath that initial response. Fed officials have expressed concerns about stagflation—rising prices coupled with slow economic growth—becoming a reality.

UK Economic Factors

The significant decline in US durable goods orders, down 6.3%, may not have hit as hard as the expected 7.9% drop, but it still marks weakness. This follows a notable 7.6% rise, creating a stark contrast. Such volatility adds to worries about inflation and growth. If these declines continue across industries, market sentiment could shift from optimism to a more cautious stance. In the UK, the Pound has remained strong against most currencies, except versus the Dollar’s recent advances. This strength is backed by positive economic data: rising retail sales, increasing consumer prices, and steady GDP growth. This resilience keeps Sterling above its important short- and long-term moving averages. The upward trend is solid, especially with the RSI approaching 70. Looking forward, the Bank of England is likely to ease policy—but only slightly. This approach is based not on weakness, but rather a need for balance. The economy is growing, inflation is rising gradually, but not alarmingly. Typically, this scenario leads to careful interest rate cuts rather than drastic changes. In the future, we may see more volatility in Pound-Denominated derivatives as the UK’s softer monetary stance and the US Dollar’s strength based on sentiment continue to clash. We will be watching for confirmation—whether through tangible trade meetings or new domestic data—to see which force proves more influential. For now, the positive trend in Sterling, particularly against other currencies except the Dollar, may still have support, but sensitivity will increase as we approach policy updates or fiscal decisions. If durable goods orders in the US keep declining and inflation signals extend, the rally in the Dollar may begin to stall or at least level off. Create your live VT Markets account and start trading now.

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