UK Economic Concerns and BoE Easing

Worries about the UK’s economic future and potential quick adjustments by the Bank of England could affect the GBP’s value against the USD. Analysts predict a rate cut to 3.75% in December, with a 90% chance in the market. Currently, GBP/USD is trading at 1.3328, above the 100-EMA at 1.3300. The price is near the upper Bollinger Band at 1.3348, which indicates increasing volatility. If it closes above this level, it may lead to more gains. Support levels are at the 100-EMA and the middle Bollinger Band. The Pound Sterling, the oldest currency in the world, is greatly impacted by the Bank of England’s policies aimed at maintaining price stability. Economic data releases directly affect its value by reflecting economic health and interest rate decisions. With GBP/USD staying above 1.3300, this is seen as a critical support level in the coming weeks. Our short-term outlook is positive as long as the pair remains above the 100-day moving average, but we should prepare for increasing volatility while waiting for a clear trigger.

US Inflation Report and Its Implications

We are closely watching the delayed US PCE inflation report. Core PCE inflation in the US has been steadily decreasing throughout 2025, with the latest October reading at 2.8%, a notable improvement from 2023 levels. Another low number would almost guarantee a Federal Reserve rate cut next week, which could push GBP/USD higher. However, we must also consider the weak UK economic outlook. Recent data revealed that UK GDP was flat at 0.0% for the third quarter of 2025, raising expectations of aggressive rate cuts from the Bank of England. With a 90% chance priced in for a BoE cut, any strength in the pound may be limited. As both central banks look to ease policies, trading focuses on volatility. The Cboe Sterling Volatility Index (BPVIX) has begun to rise from last month’s low of 7.8, and we expect this trend to continue ahead of central bank meetings. This makes option strategies like straddles, which benefit from significant price moves in either direction, especially appealing. For a directional strategy, buying call options with a strike price above the 1.3350 resistance could be a good way to prepare for a weak dollar due to inflation. On the other hand, if we think the UK’s economic struggles will outweigh the Fed’s easing stance, buying put options with a strike below 1.3300 could safeguard against a downturn. The widening Bollinger Bands suggest the pair is ready for movement out of its current tight range. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now