GBP/USD is currently above 1.3000, according to analysts at BBH FX. Everyone is watching for the Bank of England’s policy rate decision, which is expected to remain at 4.00%.

Policy Rate Decision

The market sees a 30% chance of a 25 basis point cut to 3.75% in today’s announcement. A 6-3 vote among MPC members is expected, with three members in favor of the rate cut. The Bank of England is likely to hold off on any cuts until after the UK budget announcement on November 26. UK inflation is nearly double the BOE’s target of 2%, and Q3 GDP growth is expected to exceed the BOE’s projection of 0.3%. The updated forecast will be revealed alongside the policy decision in the November Monetary Policy Report. The anticipated fiscal challenges from the upcoming budget may lead to more rate cuts within the next year. Addressing a £35 billion fiscal gap will likely focus on raising taxes rather than cutting spending, which may weaken the GBP in currency pairs. As the Bank of England is expected to keep its policy rate at 4.00% today, we are monitoring the GBP/USD pair’s ability to stay above 1.3000. Even though the market believes there’s a 30% chance of a cut, the predicted 6-3 vote to maintain the rate indicates the bank isn’t ready to make a change. This cautious approach creates uncertainty for the pound in the short term. This cautious stance makes sense in light of the latest inflation data. The Consumer Price Index (CPI) for October 2025 was 3.8%, down slightly from 4.1% in September but still much higher than the 2% target. This ongoing inflation means the Bank of England may prefer to wait for more data before considering rate cuts.

Economic Projections and Fiscal Policy

Next week’s Q3 real GDP data, set to be released on November 13, will be an important indicator and is expected to show the economy’s strength. Recent business surveys, like the October S&P Global/CIPS UK Composite PMI, which scored a solid 52.5, support the idea that growth will be better than the BOE’s 0.3% prediction. This strong data allows the bank to delay any easing until after the budget. The key event for the long-term outlook is the UK budget on November 26. We expect significant fiscal tightening to address a £35 billion deficit. This situation is similar to austerity measures from the early 2010s, which led to extended monetary easing by the BOE. The government’s tax increases may slow the economy and push the central bank to cut rates more aggressively in 2026 than what the market currently expects. Given this outlook, we believe it’s wise to prepare for potential GBP weakness. Buying GBP/USD put options that expire in January 2026 would help capture possible fallout from both the budget and the BOE’s new policy. A strike price below the 1.3000 level, like 1.2850, could benefit from a downward trend. As we approach several risky events, implied volatility on sterling options is likely to rise, making options more expensive. Therefore, we suggest using put spreads, such as buying a 1.2900 put and selling a 1.2700 put. This strategy would reduce upfront costs while still providing exposure to a bearish outcome for the pound. Create your live VT Markets account and start trading now.

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