**The Swaps Market Outlook** The swaps market indicates there is a 25% chance of a 25 basis points cut to 3.75% during the Bank of England’s (BOE) meeting on November 6. Over the next year, a total easing of 50 basis points is expected, bringing the policy rate down to a low of 3.50%. Anticipated fiscal drag from the UK budget, due on November 26, leaves the door open for more easing by the BOE, which could lead to the British Pound (GBP) struggling against the Euro (EUR). Currently, the GBP is facing difficulties, despite surprisingly strong retail sales and PMI data for September and October. This disconnect suggests that the market is focusing less on current economic conditions and more on the Bank of England’s future policies. The main factor driving this trend is the increasing expectation that the BOE will ease monetary policy. The swaps market has priced in a one-in-four chance of a rate cut at the November 6 meeting. Anticipated fiscal tightening in the budget on November 26 is leading many to believe that the BOE needs to lower rates further to support the economy, putting continued pressure on the pound. **UK Inflation and Fiscal Strategy** We can see this policy shift reflected in recent inflation data. The UK’s Consumer Price Index (CPI) dropped to 2.8% in September 2025, down from over 3.5% earlier this year. This decline provides the BOE with a reason to consider easing, similar to the situation in 2019 when rate guidance overshadowed mixed economic indicators. This historical context supports the outlook for a weaker sterling. For derivative traders, this means positioning for further GBP weakness, especially against the Euro. With the European Central Bank signaling a pause in its easing cycle, taking a long position on EUR/GBP through options or futures could be appealing. This approach leverages the growing difference in monetary policy between the two central banks. Volatility is expected around the important dates of the BOE meeting on November 6 and the Q3 GDP release on November 13. Traders may want to use options, such as buying GBP puts with a December expiration, to manage risk while still maintaining downside protection. An unexpectedly hawkish statement from the BOE or a strong upside surprise in GDP figures could challenge this bearish view. Create your live VT Markets account and start trading now.

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