During Tuesday’s North American session, GBP/USD fell by over 0.17% as the US Dollar Index reached a three-day high. The pair was trading at 1.3384 after peaking at 1.3417. Market activity was lower due to the US government shutdown and the upcoming Consumer Price Index (CPI) data release. Meanwhile, the UK reported September’s Public Sector Net Borrowing at £20.24 billion, which was below the expected £20.5 billion.

Fiscal Planning and Impacts

UK Chancellor Rachel Reeves intends to raise taxes and cut spending to achieve fiscal targets and manage British borrowing costs. She is also looking for a larger fiscal buffer, which may require trade-offs in the budget due on November 26. Traders are looking forward to inflation data from the UK on Wednesday. CPI is expected to rise from 3.8% to 4% in September. Any difference from this prediction could affect the Bank of England’s (BoE) monetary policy. A heat map shows percentage changes in major currencies, focusing on the British Pound and US Dollar. Christian Borjon, a retail trader since 2010, uses technical analysis and began as a swing trader while working outside finance. As of October 21, 2025, the pound is weakened and struggling around the 1.2250 level. This decline is mainly due to a stronger US dollar, with the DXY surpassing 107 this week amid ongoing inflation concerns. This situation resembles past years, particularly the late 2010s when a strong dollar influenced GBP/USD.

Upcoming Economic Indicators

Attention is now on the US Core PCE data set for release next week on October 31. The market predicts a 0.3% month-over-month increase, which could reinforce the Federal Reserve’s aggressive approach. Derivative traders should prepare for potential volatility around this release, as a higher-than-expected number might lead to a notable drop in GBP/USD. In the UK, fiscal policy is still a major issue, similar to earlier years when Chancellor Reeves first announced her objectives. Last week’s Public Sector Net Borrowing figures for September were £18.5 billion, slightly above forecasts, increasing pressure on the government’s budget. Her upcoming Autumn Statement will be closely watched for hints of spending cuts, which could further impact the UK’s growth outlook and the pound. UK inflation data is also on the radar for tomorrow, with the headline CPI for September 2025 expected to stay steady at 3.1%. A surprise CPI figure could alter the Bank of England’s plans. Any unexpected rise might compel the BoE to keep its tough policies, creating a complex situation for the currency pair. With pressures from both US and UK data releases approaching, a significant market move in either direction is likely. This environment is ideal for derivative strategies that can benefit from increased volatility, such as long straddles or strangles. Traders may consider buying options to manage their risk while preparing for these important economic events. Create your live VT Markets account and start trading now.

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