The GBP/USD remains steady during the North American session, with the US Dollar gaining some strength. The pair is trading at 1.3437, showing little change due to expectations that the Bank of England won’t cut rates again in 2025. The Pound Sterling has gained over the last three days, hovering around 1.3450 against the US Dollar. This stability comes as forecasts about a potential Federal Reserve interest rate cut in September weigh on the Dollar.

Asian Trading Hours Update

During Asian trading hours on Friday, the GBP/USD shows minor losses around 1.3440. The US Dollar has strengthened amid speculation that Fed Governor Christopher Waller might succeed Fed Chair Jerome Powell. The Bank of England has cut rates by 25 basis points to 4%, which suggests a potential end to its easing cycle. Policymakers are focused on controlling inflation, which is currently exceeding targets. The GBP/USD pair is stable near 1.3440, following the Bank of England’s rate cut. The market is now anticipating the Federal Reserve’s actions next month. The Bank of England’s cautious approach makes sense given recent data. The latest inflation report for July 2025 shows UK CPI is still high at 3.1%, significantly above the 2% target. This makes further rate cuts unlikely this year as they prioritize controlling prices.

Market Implications and Strategies

In the United States, the situation is different, putting pressure on the Dollar. The Fed’s favored inflation measure, Core PCE, has dropped to 2.5% in recent data, getting closer to their comfort level. This is driving expectations for a rate cut at the September meeting. The differing policies suggest we should consider buying GBP/USD call options. These options will profit if the pair rises, as we anticipate. Using options instead of trading the currency directly helps limit our risk if the Federal Reserve surprises the market. Currently, currency market volatility is at its lowest in months, making options cheaper to buy. We believe it’s crucial to set these positions up before the September Fed meeting, looking at options that expire in late September or October to take advantage of any potential movements. We remember the aggressive rate hikes of 2022 and 2023, which highlighted how seriously central banks view inflation. The Bank of England seems to be keeping this lesson more in mind than the Fed. This difference in policies is the main reason for our trading outlook in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now