The Pound Sterling is gaining strength against the US Dollar, mainly due to mixed employment figures from the UK and increasing tensions between the US and EU. In the UK, companies added 82,000 new jobs, keeping the unemployment rate steady. In contrast, the US Dollar is losing value due to disputes over Greenland. The GBP/USD pair has risen to around 1.3490, continuing its upward trend, with the “Sell America” sentiment gaining traction. The US Dollar Index has dropped by 0.54%, now sitting just under 98.50. This market reaction follows President Trump’s 10% tariffs on several EU countries and the UK, linked to the Greenland issue.

The UK Labour Market

The UK labour market shows an unemployment rate of 5.1%, remaining stable instead of dropping to 5%. Average earnings, excluding bonuses, increased by 4.5% annually, while total wage growth (including bonuses) rose by 4.7%. Slower wage growth leads to expectations that the Bank of England might cut interest rates. The GBP/USD has reached nearly 1.3480, just above the 20-day Exponential Moving Average of 1.3433. The 14-day Relative Strength Index reads 57, indicating balanced momentum. Resistance is found at the 61.8% Fibonacci retracement level of 1.3491; a daily close above this could lead to gains towards 1.3622. The US Dollar is the most widely traded currency, comprising 88% of global forex transactions. The Federal Reserve impacts the USD through its monetary policy, altering interest rates to manage inflation and employment. Typically, quantitative easing weakens the USD by increasing its supply.

The Ongoing Sell America Trade

The “Sell America” sentiment, driven by the conflict over Greenland, is currently shaping market trends. As the US Dollar Index drops towards 98.50, this could present opportunities to trade against the dollar. The Pound Sterling is showing resilience, despite mixed economic data from within the UK. We see a strong case for buying call options on the GBP/USD pair, especially with strike prices above the 1.3500 resistance level. This would allow us to benefit from a possible rally toward 1.3620 while limiting our downside risk to the premium paid. Historically, we’ve witnessed currency fluctuations of 2-3% during the US-China trade tensions in 2019, illustrating how quickly political factors can impact markets. Overall market anxiety is on the rise, reflected by increased volatility. The CBOE Volatility Index (VIX) has climbed from lows of 12.8 in December 2025 to over 17, indicating that traders expect larger price swings. This situation is ideal for purchasing straddles on major pairs like EUR/USD to profit from significant movements in either direction. The upcoming UK inflation report is a key event to monitor. The UK Consumer Price Index (CPI) was at 3.1% in the third quarter of 2025, significantly above the Bank of England’s target. Another high inflation reading could cause the central bank to delay any interest rate cuts, which would support the Pound further. Conversely, we anticipate the US Personal Consumption Expenditures (PCE) inflation data will show a cooling trend, similar to the 2.6% annual rate observed at the end of 2025. This would reinforce the belief that the Federal Reserve has no urgent need to raise rates, putting additional downward pressure on the US Dollar. The differing inflation outlooks between the UK and the US favor a stronger GBP/USD. This situation is peculiar, as the US is causing the geopolitical uncertainty that typically affects safe-haven assets. As a result, there’s a shift toward investments like gold, which has recently hit record highs above $4,700 per ounce. We should consider taking long positions in gold through futures or call options to take advantage of this move to safety. Create your live VT Markets account and start trading now.

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