The British Pound faces depreciation pressure against the US dollar, with the US dollar's appreciation becoming the market focus

The GBP/USD exchange rate has recently been on a continuous decline, reflecting the strong dollar appreciation trend. This phenomenon contrasts sharply with the market’s widespread expectation of the Federal Reserve cutting interest rates—investors generally anticipated about three rate cuts within 2026, which should have been bearish for the dollar. However, the reality is quite different, with the dollar showing a clear upward momentum.

Options Market Signals Weakening Dollar Bearish Sentiment

According to NS3.AI data analysis, sentiment in the options market is subtly changing. Although bearish bets on the dollar previously dominated, this shorting force has recently weakened. Meanwhile, currency market participants have readjusted their expectations for the scale of rate cuts—by the end of the year, the market now expects the Fed to cut rates by approximately 64 basis points, which is much more moderate than the previous expectation of three cuts (usually around 75 basis points).

Persistent Inflation Limits Rate Cuts, Supporting the Dollar

Some market strategists believe that the optimistic outlook for three rate cuts by the Fed may be overly idealistic. Given the current economic momentum and inflation levels still above the Fed’s 2% target, the urgency for rate cuts has decreased accordingly. This economic fundamental support suggests the dollar is likely to remain strong, and the pressure on GBP/USD will persist. Market consensus is gradually shifting towards the possibility of the dollar continuing to appreciate in the remaining time.