The Bank of England (BoE) is set to announce its policy decision, likely keeping the bank rate at 4.00%. The voting is expected to split 7-2, with a reduction in quantitative tightening from £100.0 billion to £67.5 billion. Markets predict a reduction of 10 basis points by the end of this year and 42 basis points by the end of 2026. The BoE is likely to stick with its previous guidance, focusing on inflation.

US Session Focus

In the US session, attention will be on the Jobless Claims report. Initial Claims are forecasted to drop to 240,000 from 263,000. Continuing Claims are expected to rise slightly to 1,950,000 from 1,939,000. Last week’s spike in Initial Claims was caused by fraud in Texas, which distorted the data. These figures are likely to be adjusted, staying within a four-year range, with 260,000 as the peak. This report comes after the recent Federal Reserve decision and could impact market trends, especially if the figures differ from expectations. The Fed has taken a more cautious approach, and economic data in the months to come may adjust their future predictions. With the Bank of England expected to hold the rate at 4.00% today, derivative markets are indicating a “higher for longer” perspective. Given that UK inflation is stubborn, recently at 3.1% in August 2025, market predictions of only a 10 basis point rate cut this year seem reasonable. Traders might want to consider strategies that benefit from minimal declines in UK rates, such as selling out-of-the-money call options on Gilt futures.

Market Implications

Attention shifts to US Jobless Claims, especially after last week’s fraudulent data boost. A number lower than the expected 240,000 would suggest a strong labor market, similar to the tight conditions seen in much of 2024 when claims often stayed below 220,000. A solid report would support the Fed’s hawkish tone from yesterday, likely increasing US dollar volatility and putting pressure on Treasury futures. This focus on data makes it likely that implied volatility on short-term options will stay high. Given the Fed’s approach, any changes in upcoming labor or inflation data could lead to significant market movements. We anticipate traders will use options straddles on major currency pairs like EUR/USD around important data releases to take advantage of expected price fluctuations, whatever the direction. Create your live VT Markets account and start trading now.

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