Pound Drops to Weekly Low Below 1.3600 as Dollar Momentum Builds

On Thursday, GBP/USD fell for a second consecutive trading session, slipping below the 1.3600 mark to a weekly low. The move followed U.S. inflation data that came in hotter than expected, reinforcing market bets that the Federal Reserve will maintain its tight monetary policy stance. That pushed the U.S. dollar index sharply higher, weighing broadly on major non-dollar currencies.

**Dollar gains momentum, pound loses key support**

The hot U.S. inflation report gave dollar bulls fresh momentum. The dollar index climbed to multi-week highs, dragging GBP/USD down from Wednesday's peak. Entering the U.S. trading session, the pair had already fallen to near weekly lows and extended losses below 1.3600. At last check, GBP/USD was trading around 1.35822, with market sentiment clearly tilted in favor of the dollar.

**BoE caution fails to lift sterling**

On the U.K. side, Bank of England officials expressed a cautious view on inflation expectations, noting that the current rate of around 4% remains too high. However, this did little to support the pound. Traders responded by pushing back expectations for the timing of the BoE's first rate cut, now pricing no move before April 2026. Still, in the absence of fresh positive catalysts in the U.K., sterling's interest rate advantage was overshadowed by the dollar's strength.

**Market focus shifts to dollar-driven cross-asset narrative**

With the dollar in firm control, risk appetite across markets stayed subdued. Reports indicated that European and Asian funds have recently increased options activity based on dollar strength, with euro/dollar put volume significantly outpacing call volume. This flow of capital further validated the return of a "strong dollar" narrative, leaving non-dollar currencies like the pound under sustained external pressure. In the near term, sterling's trajectory will remain highly dependent on the dollar's continued momentum and upcoming economic data from both the U.S. and the U.K.