The GBP/USD pair has dropped to 1.3149, close to a seven-month low. This decline happened after the UK government decided to cancel planned income tax increases. The current government, led by Keir Starmer and Rachel Reeves, is trying to address a £30 billion budget deficit through indirect measures. Forecasts predicted the GBP/USD could fall to between 1.3050 and 1.3139, and it did reach a low of 1.3010. Experts believe that if this low holds, we might see a significant rally in the GBP/USD.

Wave Pattern Analysis

On September 17, the GBP/USD reached a wave ((x)) high at 1.3726. Following that, it declined, fitting the wave ((y)) pattern labeled as (a)-(b)-(c). In other market news, the DOW JONES has rebounded after fluctuations in AI stocks, while gold dipped below $4,100. At the same time, the USD/JPY is nearing a nine-month high due to a stable US Dollar. FXStreet notes that all market information should be taken lightly, and personal research is essential before making any investments. This article is not a financial recommendation, and FXStreet is not responsible for any investment results. As of November 14, 2025, the pound is struggling near a seven-month low against the dollar, trading around 1.3149. This weakness is due to the government canceling tax increases, causing uncertainty ahead of the Autumn Statement scheduled for November 26. Traders are concerned about how the UK will manage its £30 billion budget deficit. However, we believe the decline that started in July may have finally ended with the low of 1.3010 on November 5. From a technical perspective, this completes a specific wave pattern and suggests a strong rally could be on the way. This sell-off may represent a bottoming process rather than the beginning of a new downward trend.

Derivative Trading Strategy

Derivative traders might want to prepare for a possible rebound in GBP/USD in the coming weeks. Buying call options could be a smart way to take advantage of this expected rally while keeping downside risk limited. The goal is to act on the belief that the pound is oversold due to recent political news. This positive outlook is backed by new economic data that could influence the Bank of England’s decisions. The latest figures from the Office for National Statistics showed UK core inflation unexpectedly rose to 2.9% in October, slowing its decline towards the 2% target. This ongoing inflation reduces the chances of any rate cuts from the BoE soon, which is favorable for the pound. We’ve seen similar situations before, especially after the turbulent “mini-budget” in autumn 2022. Following that initial dramatic fall due to fiscal policy fears, the pound recovered over several months once a clearer policy emerged. The current situation might follow this pattern—initial shock giving way to a sustained recovery. Thus, the recent low of 1.3010 appears to be a vital support level. As long as the price stays above this mark, the positive outlook for a significant rally remains intact. However, a drop below this level would indicate that the corrective phase is still ongoing, prompting a reevaluation of any bullish positions. Create your live VT Markets account and start trading now.

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