Go short on GBPUSD with downside potential to 1.31500

The GBPUSD pair is currently hovering around 1.35300, and its downside risk is very real. What is weighing on the pound? The growing policy gap between the US and the UK. The Bank of England (BoE) is sitting tight at 3.75%, though the likelihood of a rate hike at the next meeting is only about 15%—hardly enough to get excited about. Even with inflation still running hot, the regulator might have to play it safe, worried about a slowing economy and sky-high borrowing costs. If hopes for another monetary tightening start to fade, the pound will lose a key pillar of support.

Across the Atlantic, the Federal Reserve (Fed) is singing a different tune—one that sounds a whole lot better for the dollar. After the central bank's hawkish rhetoric, September hike bets have crept back onto the table, with sticky inflation and soaring oil costs strengthening the case for further tightening. Whether or not the regulator holds interest rates steady at the next meeting, officials could still drop a strong hint about what's coming next. Therefore, US yields are likely to stay elevated, keeping the greenback in demand and putting pressure on the pair.

Then there is the UK bond market, which is a simmering concern for sterling. The 10‑year Treasury yields have just blown past 5.2%, a level not seen since around 2007. On paper, higher returns might make the pound look more attractive. In reality, however, they are a red flag, signaling growing unease about the country's fiscal health and ballooning debt costs. If yields keep climbing, investors will view this as a warning sign rather than a positive indicator for sterling. To make matters worse, US 10-year Treasuries are also holding firm, keeping dollar assets firmly in the spotlight.

The final recommendation:

— Sell the GBPUSD pair at the current price (1.35300), targeting 1.31500 within one month.

— To protect your position from an unexpected downside, place a Stop Loss order at