The Pound Sterling rose by 0.60% against the US Dollar during the North American session on Wednesday, thanks to easing US-China trade tensions. GBP/USD was trading at 1.3396, bouncing back from a low of 1.3309. US Treasury Secretary Scott Bessent suggested putting a hold on tariffs on Chinese imports in exchange for concessions regarding China’s export limits on rare earths. Federal Reserve Chair Jerome Powell’s comments also weighed on the US Dollar, noting labor market weakness and hinting at moving towards neutral interest rates.

Impact Of The US Government Shutdown

In the US, the government shutdown could lead to higher unemployment rates due to potential federal layoffs. The upcoming Fed Beige Book release is expected to shed light on the state of the economy. In the UK, Bank of England Governor Andrew Bailey reacted to a disappointing employment report, noting the weakening labor market. The upcoming Autumn Budget, which is likely to include tax increases and spending cuts, continues to influence GBP/USD. Despite some gains, GBP/USD could remain on a downward trend unless it surpasses the 1.3400 level, with risks of dropping below 1.3248. Current data shows GBP has lost value against most currencies this week, except for the New Zealand Dollar. On October 15, 2025, the GBP/USD pair is experiencing a temporary rise towards 1.3400. This change is mainly driven by US Dollar weakness after Powell’s dovish comments and easing US-China trade tensions. However, the overall outlook for the pair stays bearish.

Impact Of Economic Reports

The recent weakness in the US Dollar seems justified and may continue for a while. The latest Non-Farm Payrolls report indicated a gain of just 150,000 jobs, lower than the expected 180,000, confirming the labor market issues that Powell pointed out. If the government shutdown persists, it could resemble the 35-day shutdown from late 2018, which would further hurt employment data and weaken the dollar. This situation suggests that selling call options on the US Dollar Index (DXY) might be a smart approach to take advantage of potential declines. Traders could also short USD futures against stronger currencies. The current rise in GBP/USD should be seen more as a consequence of dollar weakness rather than pound strength. However, we need to be cautious about the strength of Sterling, especially with the upcoming Autumn Budget. Chancellor Reeves has confirmed that tax hikes and spending cuts are on the way, which could negatively impact the UK economy. Looking back at the turmoil following the fiscal events in September 2022, we can see how quickly sentiment towards the pound can change. Thus, the present strength in GBP/USD could create an opportunity to hedge or prepare for a reversal. Buying put options on GBP/USD with a strike price below 1.3250 would provide protection against possible negative surprises from the budget or a failure to maintain the 1.3400 level. This uptick allows for entering protective positions at a better price than just the day before. Given these conflicting signals and significant challenges for both currencies, we can expect increased volatility. A pair trade, like going long EUR/GBP, could help isolate the pound’s specific weaknesses ahead of the budget. If GBP/USD fails to close above 1.3400 decisively, it could indicate that this rally is temporary, keeping the path towards the 200-day moving average at 1.3183 open. Create your live VT Markets account and start trading now.

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