GBP/USD has fallen for the third straight day, dropping over 0.25% and going below 1.3200 due to the Federal Reserve’s recent rate changes. It is trading at 1.3160 after reaching a high of 1.3218 earlier. The Federal Reserve lowered rates to 3.75%-4% as the US faces a prolonged government shutdown. This decision was not unanimous. They also announced they would end Quantitative Easing on December 1, without promising further rate cuts in December.

Pressure on the British Pound

The Pound Sterling is under pressure as the Bank of England plans its monetary policy and UK fiscal measures. There are potential changes expected regarding the windfall tax on the oil and gas industry, as well as possible tax increases. In the U.S., several Federal Reserve members are set to speak, which may provide clarity on the economy. Technically, GBP/USD shows a bearish trend, having dropped below the 200-day SMA. Possible support levels are at 1.3000 and 1.2708. The Bank of England issues the Pound Sterling, which makes up 12% of foreign exchange transactions, amounting to about $630 billion daily. Its value is impacted by the BoE’s policies, economic data, and trade balance. The Federal Reserve’s recent moves suggest the U.S. dollar may strengthen in the coming weeks. While rates were cut, Chairman Powell’s comments indicate hesitance to cut further. The latest core PCE inflation data from September 2025 shows a persistent 3.8%. This has increased demand for dollar derivatives, especially against the pound.

Consequences of Technical Breakdown

The Pound Sterling is facing more pressure due to domestic uncertainty. UK inflation is at 3.1%, and Q3 2025 GDP growth is only 0.1%, putting the Bank of England in a tough spot ahead of its meeting next week. Mixed reports about tax hikes and cuts from the Chancellor’s office contribute to this uncertainty. The fall below the 200-day moving average at about 1.3242 is a critical signal. Historically, such breaks lead to prolonged downward movement, as seen during late 2022. This technical breakdown adds to the expectation of more declines toward the 1.3000 level. Given this situation, buying GBP/USD put options for late November or December 2025 seems like a smart move. This strategy allows us to benefit from a potential drop to the 1.3000 level while managing our risk to the premium paid. It’s a direct play on the likelihood of further weakness in the pound. Additionally, we should prepare for increased market volatility around the UK budget announcement and U.S. employment data. Recent U.S. weekly jobless claims fell to 215,000, reinforcing the Fed’s perspective on the tight labor market, making upcoming data crucial. Signs of U.S. economic strength could further push down GBP/USD. Create your live VT Markets account and start trading now.

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