**The Impact of the Fed’s Interest Rate Cut** During U.S. trading, GBP/USD dropped below the 200-day Exponential Moving Average (EMA), signaling a bearish trend. The decline of the Pound has been worsened by a market shift towards safer assets like the Dollar, driven by risk aversion. Federal Reserve Chair Jerome Powell’s cautious remarks suggest a “wait-and-see” approach, creating uncertainty around future rate cuts. With limited economic data and a cautious market mood, the outlook for the Pound remains bleak. In summary, the fall of GBP/USD highlights how U.S. monetary decisions and political factors affect currency values, as the Dollar strengthens amid reduced expectations for aggressive Fed actions. Following the Federal Reserve’s latest move on October 29, 2025, it’s clear that a stronger Dollar is likely in the near future. The drop below the 200-day EMA in GBP/USD is a crucial technical signal confirming the bearish trend. Therefore, we should prepare for further weakness in the Pound against the Dollar over the coming weeks. For those trading derivatives, buying GBP/USD put options with December or January 2026 expiries seems to be a smart strategy. This approach allows us to take advantage of potential declines while clearly defining our maximum risk to the premium paid. The market’s adjustments regarding future Fed rate cuts serve as the key driver for this trade. **UK Domestic Data and Strategy** This negative outlook for the Pound is supported by recent domestic data from the UK. The latest release from the Office for National Statistics revealed a sluggish GDP growth rate of just 0.1% for the third quarter, while core inflation has decreased to 2.4%. These figures give the Bank of England little reason to adopt a more aggressive stance, leaving the Pound fundamentally unsupported. On the other hand, the Fed’s cautious approach is understandable given the resilience of the U.S. labor market. The recent Non-Farm Payrolls report, released in early October 2025, showed a healthy addition of 215,000 jobs, keeping the unemployment rate at a low 3.8%. This economic strength justifies the Fed’s hesitation to commit to further rate cuts, bolstering the Dollar’s value. We’ve seen a similar pattern in the past, such as during the Fed’s policy shift in 2019 when an initial “hawkish cut” also led to a period of Dollar strength. In that case, markets quickly corrected their expectations for a deep easing cycle, resulting in a stronger Dollar against its peers. The current situation appears strikingly similar, suggesting that the Dollar rally may have more room to grow. The ongoing U.S. government shutdown adds uncertainty, which could keep implied volatility high. While this increases the cost of buying options, it also creates potential for significant profits if the market moves as anticipated. Traders might also explore bear put spreads to reduce entry costs for a bearish position while targeting a specific downward range for GBP/USD. Create your live VT Markets account and start trading now.

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