The GBP/USD currency pair found support slightly above 1.3000, bouncing back a bit after several weeks of losses. As we approach the Bank of England’s (BoE) interest rate decision, the pair stays unstable, hovering around 1.3050, having dropped over 3% from its mid-October peak of 1.3470. There hasn’t been much economic data from the UK as the BoE prepares to announce its latest rate decision. The Monetary Policy Committee is likely to vote six-to-three to keep interest rates steady, with no significant changes expected, despite UK inflation staying at 3.8% in August.

Pound Sterling and Its Global Role

Pound Sterling, the oldest currency in the world, plays a key role in the UK’s economy and global trade. It represents 12% of worldwide forex transactions, averaging $630 billion each day. The BoE’s monetary policy decisions, which aim for price stability, greatly impact the Pound’s value. Adjustments in interest rates are the main method used to manage inflation. Economic indicators like GDP, PMIs, and employment figures affect the Pound’s worth by showing the UK’s economic condition. A thriving economy attracts foreign investment, which might lead the BoE to raise interest rates and increase the value of GBP. On the other hand, weak data can weaken the Pound. Currently, GBP/USD is struggling to stay above 1.3050 after a tough few weeks. The spotlight is on the Bank of England’s rate decision, but with September 2025 inflation data holding steady at 3.6%, no changes are anticipated. This persistent inflation, almost double the 2% target, leaves the central bank with little flexibility. Derivative traders should watch the Monetary Policy Committee’s vote tomorrow for any hints of wavering resolve. While a 6-3 vote to maintain rates is expected, a shift to a 5-4 split would indicate growing pressure from a slowing economy. This type of dovish surprise could push the Pound down significantly, breaking through the 1.3000 support level.

US Government Shutdown and Its Consequences

The ongoing US government shutdown, now in its third week, is making the dollar side of things unpredictable. Without official data like Non-Farm Payrolls, markets must rely on private surveys, which have been inconsistent in the past. This uncertainty from the US adds extra risk for anyone holding long positions in GBP/USD. Given the clear bearish trend and upcoming event risks, buying put options on GBP/USD is a wise choice for the coming weeks. This strategy offers defined risk while giving exposure to a potential drop below the 1.3000 psychological level. Strike prices near 1.2950 or 1.2900 could prove profitable if the BoE’s statement hints at a more pessimistic outlook on future growth. This situation resembles what we experienced during the 2023-2024 period when the Bank of England kept rates high, even as the economy stagnated. This historical context shows that the bank is willing to endure economic struggles to lower inflation to its target. Thus, any rallies in the Pound should be approached cautiously and viewed as opportunities to prepare for further declines. Create your live VT Markets account and start trading now.

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