Sterling fell 0.31% in North American trade as the US Dollar rose alongside higher US Treasury yields. GBP/USD traded at 1.3392 after a session high of 1.3437.
The US 10-year Treasury yield reached a 16-month peak of 4.687% as markets priced in higher inflation linked to an energy shock and a possible Federal Reserve rate rise later this year. West Texas Intermediate crude was up 0.79% at $103.29 a barrel.
Dollar Gains Pressure Sterling
US President Donald Trump said he would not proceed with an attack against Iran on Tuesday, while talks related to uranium enrichment remained delayed under Iran’s earlier proposal. The US data calendar was empty, with attention on minutes from the Fed’s last meeting under outgoing Chair Jerome Powell.
Kevin Warsh is set to be sworn in as the new head of the US central bank on Friday. In the UK, payrolls fell by 100K from March to April, and the Unemployment Rate rose from 4.9% to 5%.
UK politics also weighed on the Pound, with Keir Starmer facing a leadership challenge and Andy Burnham seeking a parliamentary seat. UK April inflation is expected to ease from 3.1% to 2.6% year on year.
Technically, GBP/USD sat below a moving average cluster near 1.3429, with RSI at 43.6. A move above 1.3429 could reduce downside pressure, while a break under 1.3390 may extend losses.
Strategies For A Lower Pound
Given the market dynamics we observed in 2025, the current environment presents a similar opportunity. We are again seeing US Treasury yields climb, with the 10-year note recently touching 4.8%, its highest level this year, amid renewed inflation concerns. This is strengthening the US dollar, creating a headwind for the British Pound just as it did before.
The situation in the UK mirrors the challenges from last year, when we saw the jobs market begin to crack. The latest data shows UK unemployment has ticked up again to 4.5%, and wage growth is finally showing signs of slowing, which supports the case for a weaker Sterling. We must remember how quickly sentiment turned against the Pound when employment figures faltered in 2025.
For traders, this suggests positioning for further downside in GBP/USD in the coming weeks. Buying put options on the pair offers a way to profit from a potential decline while defining your maximum risk. Based on last year’s price action, a break of current support could lead to a swift move lower.
Another strategy to consider is selling out-of-the-money call spreads, which benefits if the GBP/USD pair stays below a certain resistance level. This is appealing because the fundamental picture, with a hawkish Federal Reserve and a more hesitant Bank of England, caps the Pound’s upside potential. History shows that when US yields are spiking, rallies in the pair are often short-lived.
The rise in geopolitical risk premiums is also increasing implied volatility in the currency markets. While this makes options more expensive, it confirms that the market is bracing for larger price swings. Therefore, defined-risk strategies like spreads are particularly well-suited for navigating the weeks ahead.
