The Pound Sterling (GBP) has fallen against the US Dollar (USD), dropping to about 1.3520 during Tuesday’s European trading session. This dip comes as the US Dollar strengthens, with the Dollar Index (DXY) rising slightly to around 98.45. Analysts think the GBP might bounce back to test 1.3560 before stabilizing. However, they don’t expect it to rise to 1.3590 in the short term. In the long run, reaching 1.3590 could happen, but further increases beyond that are seen as unlikely.

Impact Of Currency Fluctuations

The US Dollar lost some value earlier due to a general risk-on sentiment, while the Pound Sterling performed better than other major currencies overnight. According to FXStreet, exchange rate changes are influenced by several factors, including geopolitical events and economic data releases. Editorial content and broker recommendations for 2026 can help choose the right Forex brokers based on individual trading needs. It’s essential to do thorough research and acknowledge the risks involved before making financial decisions. FXStreet emphasizes that their information does not count as financial advice and highlights the risks of market investments. Given the Pound’s drop to 1.3520, there’s a possibility for a short-term rise to around 1.3560 before it likely stalls. The chances of a significant rally beyond 1.3590 are low, which suggests traders might focus on this limited gain. A strategy to consider is selling call options with a strike price at or above 1.3600 to earn premiums from the expected price ceiling. This perspective is supported by recent economic data from late 2025. The UK’s final Q4 2025 GDP figures showed modest growth at just 0.3%, providing some backing but not enough for a major breakout. Additionally, the minutes from the Bank of England’s December 2025 meeting revealed a divided stance on interest rate policy, dampening enthusiasm for the Sterling.

Market Reaction To Economic Data

The US Dollar Index is steady around 98.45, boosted by a strong US jobs report for December 2025, which added 210,000 jobs and kept the unemployment rate at 3.9%. This underlying strength of the dollar poses challenges for the GBP/USD pair, making it risky for traders to buy out-of-the-money GBP calls in the coming weeks. In terms of volatility, the 1-month implied volatility for GBP/USD has dropped to 7.2%, down from over 9.5% during the market fluctuations of November 2025. This decline suggests that traders expect the market to remain relatively stable, making strategies that benefit from time decay, like selling strangles or iron condors, more appealing. This aligns with predictions that the pair will level off soon. We also need to consider the wider risk environment, as Gold trades near $4,500 an ounce, reflecting ongoing geopolitical concerns. Any sudden shift towards a risk-off sentiment could boost the safe-haven US dollar. Therefore, traders who hold long GBP positions might want to buy protective puts to guard against a sudden downturn. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now