The GBP/USD rate has risen as the US ISM Manufacturing data shows a contraction for the ninth month in a row, increasing the chances of a Federal Reserve rate cut. The market predicts an 87.4% likelihood of a cut in December, fueled by weak employment numbers. Meanwhile, the British pound may come under pressure due to a nearly 90% chance of a Bank of England rate cut, with economic data from both the US and UK coming this week. On Monday, GBP/USD rose by over 0.20% as traders felt more confident about possible adjustments from the Federal Reserve. Currently, GBP/USD is at 1.3250. In the US, the ISM Manufacturing PMI dropped from 48.7 to 48.2 in November, and employment numbers fell to 44, although Prices Paid rose to 58.5.

Trading Resistance and Support Levels

Traders face resistance at 1.3274 and 1.3312. The RSI indicates a positive momentum, suggesting a potential increase if it surpasses 1.3315 and the 100-day SMA at 1.3369. However, if it drops below 1.3200, support may be found at 1.3145. Recent data shows the British Pound is performing well, especially against the Japanese Yen. Over the last 30 days, GBP has increased by 0.67% against the Euro and 1.33% against the Yen. With an 87.4% chance of a Federal Reserve rate cut next week, GBP/USD is likely to trend upward. However, the nearly 90% chance of a Bank of England cut creates a potential clash for the currency pair. This “race to cut” means we can expect volatility in the coming weeks. The expectation for a Fed cut is backed by the ninth consecutive month of decline in the ISM Manufacturing index and a lackluster Non-Farm Payrolls report for October 2025, which showed only 155,000 jobs added, while 180,000 was expected. This adds to the appeal of buying short-term call options to benefit from any pre-meeting rise toward the 1.3300 resistance level. For those focused on relative value, US weakness may also make going long on EUR/USD an attractive choice.

Strategic Outlook and Hedging

In the UK, the pressure on the Bank of England is significant, especially after the latest CPI data revealed inflation fell to 3.1% in October 2025, down from 4.5% just two months earlier. With memories of the stagflation of 2023, the Bank seems eager to avoid stifling a delicate recovery by acting too late. This makes maintaining long Sterling positions risky without hedging through put options or selling GBP/JPY, where the Pound has performed well. This week, US Core PCE inflation data is crucial and could impact the chances of a rate cut, leading to increased implied volatility. The key resistance for the spot price is the 200-day moving average around 1.3312, a level that has limited rallies this year. A short-dated straddle or strangle option strategy could be effective for capturing potential breakouts or reversals after this data release. We’ve seen similar situations in the past, like during the coordinated easing post-2008, where the currency of the central bank seen as less dovish gained strength. The important question is not whether they will cut but who will signal a longer and deeper cycle of cuts ahead. Thus, paying close attention to the forward guidance from both the Fed and BoE meetings will be more critical than the initial 25-basis-point decision itself. Create your live VT Markets account and start trading now.

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