The Pound Sterling (GBP) rose by 0.34% against the US Dollar (USD) amid renewed optimism regarding tariff negotiations, trading at 1.2756 after bouncing from 1.2700. This rebound follows a dip to a monthly low of 1.2707 on Monday.
In the North American session, GBP/USD approached 1.2800 as the US Dollar weakened. The US Dollar Index (DXY) fell to nearly 103.00, signalling declining confidence in the US currency after it had seen a brief recovery.
Gbp Usd Declines
On Monday, the GBP/USD experienced further declines, nearing a support level at the 200-day Exponential Moving Average (EMA), alongside increasing risk-off sentiment favouring the US Dollar.
Following Tuesday’s rebound in GBP/USD, traders have clearly responded to the uptick in optimism surrounding trade tariffs. The pair’s rise back above 1.2750 after Monday’s retreat points to underlying support, particularly with the 200-day EMA acting as a technical floor. What this indicates is that, despite early weakness earlier in the week, the pair remains positioned within a broader consolidation range.
The selloff on Monday took Sterling to 1.2707, an area that flirted with the 200-day EMA, which has repeatedly functioned as a battleground for buyers and sellers alike. This level is now reasserting itself as a pivot; a clean break below would have likely opened up lower price targets, but we’ve seen momentum build back above 1.2750. From experience, price reactions around this sort of long-term average tend to create pockets of short-term volatility, which we continue to monitor when structuring positions or identifying entry levels.
What stood out to us during the North American session was the visible retreat in US Dollar strength. The DXY dropping near 103.00 reflects tangible softness in the greenback, especially after it briefly stabilised late last week. Much of this pullback aligns with yield moves and changing rate expectations in the US treasury market. With fewer flows heading towards the Dollar, Sterling and other risk-sensitive currencies found breathing room.
Market Outlook
Looking forward, derivative traders should pay close attention to reaction zones around the 1.2800 handle. There’s clear evidence of sellers returning as price tests this area. We’ve identified thin liquidity above that range, making swift price swings more likely during low-volume periods. Options positioning suggests increased activity centred around 1.2750 strikes, with both calls and puts traded near parity—implying little bias in directional sentiment from the broader market.
It will also be important to account for how upcoming macro releases and central bank communications influence market assumptions. We’re seeing somewhat fragile conviction across rate-sensitive assets, and day-to-day fluctuations in the Dollar index affirm that. With the current pattern, a reversal of USD weakness could once again test Sterling’s resilience near recent lows.
From a timing perspective, the next few sessions provide opportunities but also require heightened awareness. Volatility is not lacking, and while short-term rallies like the one observed on Tuesday can offer upside potential, they must be weighed against the broader risk appetite stance in major markets. We’ll continue to examine how risk reversals in the options market and weekly implied volatilities shift as we approach the next round of economic data.
