The GBP/USD exchange rate fell by over 0.50% on Tuesday as the UK faces financial struggles. The Office for Budget Responsibility warned of a decrease in productivity. The exchange rate dropped below 1.3300 for the first time since October. Additionally, the Pound Sterling lost ground against major currencies due to cautious expectations from the Bank of England, which overshadowed improved global market sentiment. However, the GBP/USD pair later gained some strength, hitting around 1.3365, thanks to hopes for a rate cut from the Federal Reserve.

Australian Inflation Data and RBA Meeting

Australia will release new inflation data on Wednesday, just before the Reserve Bank of Australia’s policy meeting on November 3-4. The data from the Australian Bureau of Statistics will include two different measures of inflation for the third quarter of 2025. Global markets began the week on a positive note after a trade agreement framework was announced between the US and China, led by Presidents Donald Trump and Xi Jinping. This was a welcome change following a long period of trade tensions and threats. In the cryptocurrency market, Pump.fun (PUMP) continued to recover, trading above $0.0050. This increase signals growing optimism and the potential for a rally by the end of the month. The Pound is under considerable pressure as the Office for Budget Responsibility’s planned productivity cuts suggest a significant gap in public finances. This has contributed to pushing the GBP/USD pair below the crucial 1.3300 level. UK public sector net borrowing is now expected to be £20 billion higher than previously thought, casting uncertainty ahead of the new budget.

Federal Reserve Rate Cut Expectations

Despite the Pound’s weakness, expectations for a Federal Reserve rate cut tomorrow are growing stronger. Following a weaker US jobs report earlier this month, the CME FedWatch Tool indicates that markets are expecting over a 70% chance of a cut, which is impacting the US Dollar. This difference in central bank policies is a reason why the exchange rate is having trouble finding a clear path, fluctuating around 1.3350. For those trading derivatives, this situation is ripe for volatility plays on Sterling, similar to the fiscal uncertainty seen in late 2022. Buying straddles or strangles on GBP/USD could be a wise way to trade the Fed meeting’s results and the upcoming UK budget announcement. Using volatility options on the Pound appears to be a smart choice for the coming weeks. Looking at other currencies, the Australian Dollar faces potential risks with its quarterly inflation report due tomorrow. The market expects a 1.1% quarterly increase, which would bring the annual inflation rate closer to 4.5%. This data is crucial for the Reserve Bank of Australia’s interest rate decision next week. If inflation comes in higher than expected, the RBA may adopt a more aggressive stance, likely pushing the AUD/USD pair higher. Traders should be ready for significant movement following the data release. Using puts or calls offers a manageable way to speculate on unexpected results from the Australian Bureau of Statistics. Create your live VT Markets account and start trading now.

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