The Pound Sterling (GBP) has fallen against most major currencies, except for the New Zealand Dollar (NZD). The Bank of England (BoE) held its interest rate steady at 4%, with a close vote of 5-4, which was unexpected as many anticipated a larger majority for this decision. For the first time, Deputy Governor Sarah Breeden voted in favor of a rate cut, joining other officials in this stance. The BoE cautioned about inflation pressures due to weak demand, and Governor Andrew Bailey noted that future cuts would depend on consistent drops in inflation.

Weakness Against The Australian Dollar

Currently, the British Pound is at its lowest against the Australian Dollar. Meanwhile, the US Dollar has slightly recovered after dropping on Thursday, linked to job losses in the AI sector. In October, the US saw a large increase in layoffs, changing how markets expect the Federal Reserve (Fed) to act on rate cuts. The chances of a 25-basis-point rate cut by the Fed rose to 67%. The Pound Sterling continues to trend downwards, trading below the 200-day Exponential Moving Average. Significant levels to watch are the April low of 1.2700 and the October 28 high of 1.3370, which serve as support and resistance points. The BoE focuses on controlling inflation and may adjust interest rates accordingly. They may use quantitative easing (QE) and quantitative tightening (QT) as drastic measures to influence the Pound’s value during economic ups and downs.

Central Bank Leaning Towards Easing Policy

The recent 5-4 vote by the Bank of England signals a clear shift towards easing policy. The narrow vote and the Deputy Governor’s call for a cut indicate that the Pound Sterling may face downward pressure. This dovish approach is currently the most significant force affecting the currency. Recent economic data supports this outlook. In October 2025, the UK Consumer Price Index (CPI) inflation remained steady at 3.1%, while the third-quarter GDP grew only by 0.1%. This persistent inflation and weak growth present a challenge for the Bank of England, making rate cuts more likely as they respond to low demand. For traders using derivatives, this situation offers a chance to bet on further GBP weakness against stronger currencies, like the Australian Dollar. Buying GBP/USD put options that expire in early 2026 could be a strategic move to profit from this trend, especially if the exchange rate approaches the crucial support level at 1.2700. Volatility is also important to consider; uncertainty around the timing of the next rate cut will result in price fluctuations. Selling out-of-the-money GBP/USD call option spreads, with a strike price above the October high of 1.3370, may be an effective strategy for collecting premiums. This move benefits from a declining price and time decay, betting that the Pound won’t rally significantly. On the flip side, the US labor market is showing weaknesses, especially after the October 2025 Challenger report highlighted significant job losses due to AI advancements. This could increase the chances of a Fed rate cut in December, which might limit the strength of the US Dollar. This situation makes trading GBP against other currencies appealing, offering a focused approach to exploit the Pound’s weakness. This market environment is a sharp contrast to the aggressive rate hikes seen in 2023, when central banks were tackling much higher inflation. Now, with both the UK and US economies slowing down, the focus has shifted from whether rate cuts will happen to when they will occur. Upcoming UK inflation data and the next US jobs report will be crucial in guiding these market trends. Create your live VT Markets account and start trading now.

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