Fed Rate Cut Possibility

There is a 78.6% chance of a 25 basis point rate cut by the Fed in the last two meetings of the year. The market is looking to Fed Chair Jerome Powell’s upcoming speech for details on how the US government shutdown might affect the economy. Concerns about the UK’s fiscal debt are causing the Pound Sterling to struggle against major currencies. To manage fiscal borrowings, the UK Treasury plans to either cut spending or raise taxes, which will influence the GBP. Market participants are unsure about the Bank of England’s monetary policy due to weak job demand and ongoing inflation. Investors are awaiting UK employment data for the three months ending in August. From a technical viewpoint, GBP/USD remains bearish, trading below the 20-day EMA at 1.3458. The RSI is approaching 40.00, suggesting more bearish momentum if it drops further. Key support is at the August 1 low of 1.3140, while resistance is found at the September 17 high of 1.3726.

UK Economic Uncertainty

The Pound is continuing to fall against the Dollar today, Thursday, October 9th, 2025, moving down towards 1.3365 as bearish sentiment grows. Technical indicators confirm this trend, with the pair trading below its 20-day moving average and the Relative Strength Index nearing 40. This downward pressure reveals a clear short-term trend. In the United States, the Federal Reserve’s path seems straightforward, giving the dollar a strange kind of strength. Recent data showed that September’s non-farm payrolls added only 95,000 jobs, highlighting the “labour market risks” the Fed has mentioned and reinforcing expectations for two more rate cuts this year. This clear policy direction, even if dovish, is preferable to the uncertainty in other areas. Meanwhile, the UK’s fiscal situation is causing major concerns leading up to the Autumn Budget. Public sector net debt now exceeds 103% of GDP, and the government’s commitments to reduce spending are raising worries about a possible economic slowdown. Traders remember the market chaos from the unfunded spending plans announced in September 2022, and they are right to be cautious. This situation contrasts sharply with the Bank of England’s challenges. It is stuck between a weakening economy and stubborn inflation, which recent figures show is still at 4.1%. This indecision makes the Pound particularly vulnerable, especially when compared to the Fed’s more definitive actions. The uncertainty regarding the BoE’s next steps adds to the currency’s weakness. With several upcoming events, including next Tuesday’s UK employment data and the November budget, we can expect increased volatility. This environment makes options strategies appealing, as they allow us to prepare for significant price movements. For example, buying GBP/USD put options could let us profit from a further decline while limiting potential losses. Our best approach is to prepare for additional weakness in the Pound relative to the Dollar. We should keep a close eye on the August 1 low of 1.3140 as a key support level. A strategy involving buying puts with a December 2025 expiration will not only capitalize on current downward momentum but also hedge against the risks associated with the UK’s budget release next month. Create your live VT Markets account and start trading now.

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