The Pound Sterling is steady against major currencies as attention turns to the Bank of England’s upcoming monetary policy announcement. A rate cut of 25 basis points is expected, marking the fifth cut since the cycle began in August 2024. On Monday, GBP/USD held steady, trading just below 1.3300. The US Dollar Index made slight gains, which limited the pound’s ability to benefit from a recent rise. Keep in mind that forward-looking statements involve risks and uncertainties. Market data is for informational purposes only. Always research extensively before making financial choices, as investments carry the risk of total loss. The information provided does not guarantee accuracy or timeliness. Investment also comes with risks, including emotional stress. The author has no stock positions mentioned and no business ties to any discussed companies. Currently, the pound remains stable against the dollar, staying just under the 1.3300 mark as markets await the Bank of England’s decision. A 25 basis point rate cut is widely anticipated, reflecting a moment of calm before a significant policy change. Recent data supports this expected rate cut, which would be the fifth in the easing cycle that started in August 2024. UK inflation has decreased significantly, with July 2025’s Consumer Price Index (CPI) at 2.1%, just above the Bank’s target. Coupled with sluggish GDP growth of only 0.1% in Q2 2025, this gives the committee room to act. As the 25 basis point cut is expected, implied volatility on short-term pound options has risen. This creates opportunities for traders who think the market’s response will be muted. Strategies like selling strangles could profit from falling volatility after the announcement. However, we should also be ready for surprises from the Bank of England. Over the past year, the central bank’s guidance has sometimes diverged from expectations. A cost-effective way to hedge against unexpected moves is to purchase far out-of-the-money puts or calls. The ongoing policy difference with the United States, where the Federal Reserve remains stable, continues to cap GBP/USD. This makes it hard to take bullish positions on the pound without a surprising move from the Bank of England. Therefore, we should closely watch forward guidance for hints about future rate cuts.

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