The GBP/USD has dropped below 1.3300 for the first time since mid-October. This decline is mainly due to a grim productivity forecast from the UK’s Office for Budget Responsibility (OBR). If productivity predictions are cut, it could result in a £20 billion deficit for UK public finances, making the upcoming budget more challenging. The currency pair fell by over 0.50%, trading at 1.3280 after sinking to a low of 1.3247. The different paths of the Federal Reserve (Fed) and Bank of England (BoE) may limit further losses. A 25 basis point cut by the Fed is expected, while the BoE is likely to keep rates steady.

Economic Impact on Currency

Economic data like GDP and employment figures greatly influences the value of the Pound. Strong data usually boosts the value of Sterling. A positive Trade Balance also helps the currency by increasing demand from foreign buyers. The GBP/USD is approaching the 200-day Simple Moving Average, which suggests that if it breaks below this support, it could move toward 1.3200. If it rises above 1.3300, buyers may target levels over 1.3400, signaling a possible upward trend. With the OBR warning about the £20 billion fiscal gap affecting confidence, the Pound is under continued pressure. Falling below the 1.3300 mark is notable, and traders might want to consider strategies to benefit from further declines in the coming weeks. This could include buying put options with strike prices at or below the pivotal 1.3200 level. This gloomy outlook is supported by recent data from the Office for National Statistics, showing that UK public sector net borrowing in September 2025 was £2.5 billion above expectations. As a result, the upcoming Autumn Budget is a crucial risk event. Any signs of increasing fiscal strain could push the Pound down further. Additionally, UK labour productivity grew just 0.1% in the third quarter, lending weight to the OBR’s negative assessment.

Historical Context and Market Sensitivity

Looking back at the market turmoil in autumn 2022, we can see how sensitive the Pound is to worries over the UK’s public finances. That period saw the Pound drop to historic lows near 1.0300 against the Dollar due to fiscal uncertainty. While the current situation isn’t as dire, it shows how quickly sentiment can shift against Sterling when fiscal credibility is at stake. Although the Federal Reserve is expected to reduce interest rates this week, the market seems to have already factored this in. The more pressing issue for the GBP/USD pair is the domestic challenge of the UK’s declining fiscal and productivity outlook. This focus shift means the Fed’s rate cut may not support the Pound as some might hope. From a technical perspective, the critical level to watch is the 200-day Simple Moving Average, currently around 1.3233. If the price breaks and stays below this level, it could quickly move toward 1.3200 or lower. Any rebound toward 1.3300 could present opportunities to enter new bearish positions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now