The GBP/USD pair is on the rise for the second consecutive day, trading in the mid-1.3300s. A softening US Dollar, influenced by dovish Federal Reserve expectations and a favorable risk environment, is boosting the Pound. The pair bounced back from a low of 1.3260, its lowest point since early August. Sentiment worldwide improved after President Trump withdrew his tariff threat on Chinese imports. Expectations for two more interest rate cuts by the Fed this year and concerns over a possible US government shutdown are putting pressure on the US Dollar. Meanwhile, the Bank of England is expected to keep interest rates steady, which supports the Pound.

Recent Trends and Movements

Recently, the GBP/USD dipped below 1.3300 as the US Dollar gained strength against other major currencies. The pair hit a ten-week low of 1.3280 after struggling to climb above 1.3500. Despite speculation about a US shutdown and Fed rate cuts, the Greenback has remained strong. As of early Monday, the GBP/USD is trading softly around 1.3345. The US Dollar is gaining against the Pound, even amid Trump’s tariff warnings on China. Though Beijing has defended its export policies without imposing new tariffs, economic uncertainty and trade tensions between the US and China could still impact the Greenback and this currency pair. Today, October 13, 2025, shows a very different situation for GBP/USD compared to past reports. The pair is now around 1.2450, reflecting a stronger dollar trend over the last few years. Attention has shifted from Trump’s tariffs to ongoing inflation differences between the UK and the US. UK inflation remains stubborn, with September 2025 data showing the Consumer Price Index (CPI) at 2.8%, significantly above the Bank of England’s 2% target. This has led the BoE to keep its Bank Rate at 4.75% and adopt a “higher for longer” approach, which supports the Pound and prevents a sharper decline.

Future Strategies and Predictions

In contrast, US inflation has decreased more effectively, with the latest CPI at a more manageable 2.5%. This gives the Federal Reserve more flexibility, and market forecasts indicate a 60% chance of a rate cut in the first quarter of 2026. This difference in central bank policies is driving current currency movements. The unpredictable volatility from the previous trade war era has diminished, now replaced by volatility tied to key economic data releases. In the past, the VIX index averaged around 18 during trade disputes, while currently it stabilizes near a 14 average. This change means traders should focus on strategies that capture sharp, short-term movements around data announcements for inflation and employment. Given this context, traders may consider buying straddles or strangles on GBP/USD ahead of the upcoming UK and US CPI reports. This approach allows for profit from significant price moves in either direction, taking advantage of data-induced volatility without assuming a specific direction. The implied volatility for one-month options is currently at 7.2%, which is a reasonable entry point historically for such trades. Alternatively, for those with a specific directional view, the interest rate difference supports Sterling strength in the medium term. A bull call spread could be a smart way to position for a gradual increase in GBP/USD towards the 1.2600 resistance level. This defined-risk strategy would benefit if the Bank of England maintains a hawkish attitude while the Fed shifts to a more dovish stance. Create your live VT Markets account and start trading now.

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