GBP/USD stayed weak for a third day, trading near 1.3190 in Asia on Monday. It remained in negative territory as demand rose for the US Dollar amid uncertainty in the Middle East.
US President Donald Trump set a new Tuesday deadline for Iran to reopen the Strait of Hormuz. He also increased threats against power plants and other civilian infrastructure.
Middle East Tensions Lift Dollar Demand
Iran said it would respond to any attacks on its infrastructure with similar actions, including strikes on comparable assets owned by or linked to the US. Tehran also said the strait would stay closed until compensation for war-related damage is secured.
The US Dollar also gained support after the conflict pushed energy prices higher. This increased expectations that the Federal Reserve may delay rate cuts and could raise rates later this year if inflation persists.
Markets are now focused on the latest Federal Open Market Committee Meeting Minutes for guidance on policy. The US labour report showed 178,000 jobs added in March 2026 after a revised fall of 133,000, beating a 60,000 forecast.
The Unemployment Rate fell to 4.3% in March from 4.4% in February, better than expected. The Pound faced added pressure from concerns about an energy shock to the UK, which relies on energy imports, alongside caution over public finances.
Positioning For Further GBPUSD Weakness
Given the building pressure on GBP/USD, we should consider strategies that benefit from a stronger dollar and a weaker pound. The combination of Middle East tension and a surprisingly strong US jobs report creates a clear path for continued US dollar dominance. Buying put options on the GBP/USD is a straightforward way to position for a further decline in the coming weeks.
The escalating conflict around the Strait of Hormuz is creating significant market uncertainty, which typically causes a spike in volatility. This situation means options premiums are likely to increase, rewarding those who establish positions early. For instance, we saw how the conflict in Ukraine back in 2022 caused Brent crude oil to surge above $120 a barrel, a historical precedent for the kind of energy shock that could unfold now.
The United Kingdom’s economic vulnerability makes the pound especially weak in this environment. As a net energy importer, with government data showing over a third of its energy comes from abroad, the UK is directly exposed to surging oil and gas prices. This will likely worsen its inflation problem and strain public finances, adding further downward pressure on the pound.
The strong March jobs number, which showed a 178,000 gain, solidifies the case for a hawkish Federal Reserve. This data challenges the market’s previous expectations for rate cuts this year, a view we largely held through 2025. Consequently, we should anticipate the upcoming FOMC meeting minutes to signal that interest rates will remain higher for longer.
To capitalize on this, we can use derivatives to express a view on both the currency pair and interest rate expectations. Beyond GBP/USD puts, we could look at options on short-term interest rate futures to position for the Fed holding off on any policy easing. This provides another avenue to profit from the current market dynamics.
