GBP/USD fell during the Asian session on Thursday, pulling back from a weekly high near 1.3345 and sliding to the mid-1.3200s. The move followed US President Donald Trump’s address, which helped the US dollar and ended a two-day rebound from a four-month low set on Tuesday.
Trump repeated a 2–3 week deadline and warned of strikes on Iran’s energy infrastructure if no deal is reached. He said talks were going well, but Iran rejected that, while reports said the UAE is pushing for military action to reopen the Strait of Hormuz.
Market And Technical Backdrop
On Wednesday, GBP/USD rose about 0.6% and moved back above 1.3300 after trading below that level through late March. It remained below the January high near 1.3850 and under the 50-day and 200-day exponential moving averages near 1.3400 and 1.3350, after bouncing from a March low near 1.3150.
The Stochastic RSI moved back towards overbought territory. Bank of England Governor Andrew Bailey said markets had moved too far in pricing rate rises, and noted earlier guidance pointed to one or two rate cuts in 2026 before the Iran crisis.
Given the recent comments on Iran, the US Dollar is strengthening, creating a clear headwind for the Pound. We see the GBP/USD pair struggling to hold gains and falling back towards its March lows. This pressure is likely to persist as President Trump’s two-to-three-week deadline approaches, keeping markets on edge.
This geopolitical tension is a recipe for high volatility in the currency markets. We saw a similar dynamic during the 2022 Ukraine conflict, when the British Pound Volatility Index (BPVIX) jumped by over 30% in a matter of weeks. Traders should therefore consider buying options to profit from expected price swings, as sudden news from the Middle East could cause sharp, unpredictable moves in either direction.
Options And Event Risk Strategies
With the Bank of England governor pushing back against rate hike expectations, there is little fundamental support for Sterling. This policy divergence strongly favors the US Dollar, especially in a risk-averse environment. Purchasing put options with strike prices below the March low of 1.3150 could be a prudent way to position for a further decline.
The area between 1.3350 and 1.3400 represents significant technical resistance, reinforced by key moving averages. Selling out-of-the-money call spreads above this ceiling offers a way to generate income while betting that the pound’s upside is capped. This strategy benefits from both a falling price and time decay as the situation unfolds.
We must also be prepared for the upcoming Good Friday Non-Farm Payrolls report from the US. A strong jobs number, such as the unexpected addition of over 353,000 jobs seen in January 2024, would further boost the dollar. This makes holding positions that benefit from volatility, like a long straddle, a compelling strategy heading into the data release.
