The Pound Sterling (GBP) has bounced back to around 1.3370 against the US Dollar (USD) during European trading. This recovery comes after a recent dip in the US Dollar, prompted by concerns from Federal Reserve officials, including Jerome Powell, regarding the labor market. Analysts at UOB Group predict that GBP/USD will likely stay within the range of 1.3290 to 1.3365. Although the downward trend has slowed, there is still a chance that GBP might drop further to 1.3200.

UK Data and Bank of England Stance

Recent UK data have sent mixed signals, and the Bank of England’s position remains unclear. The Pound’s struggles have affected its value against other major currencies, while EUR/GBP saw its biggest rise since September 16. The likelihood of a rate cut by the Bank of England has increased from 20% to 40% over the last three days, as the 2-year Gilt yield fell by 5 basis points. As of October 15, 2025, the Pound is in a tough spot, influenced by a weaker US Dollar and growing worries about the UK economy. The recent drop in the US Dollar, following the Federal Reserve’s comments on the labor market, has temporarily boosted GBP/USD. This creates a mixed environment where neither currency holds a distinct advantage. We expect GBP/USD to trade in a tight range of 1.3290 to 1.3365 in the coming weeks. The US Non-Farm Payrolls report from early October, which showed only 155,000 job gains compared to the expected 200,000, supports the view that the Federal Reserve will be less aggressive. This should help keep GBP/USD near the low 1.33s for the time being.

Sterling’s Limited Upside

However, the potential for Sterling to rise seems limited due to increasing speculation about a Bank of England rate cut later this year. Last week’s UK inflation data showed an unexpected drop in CPI to 2.2%, and slowing Q3 GDP growth has pushed the market’s expected chance of a rate cut up to 40%. This suggests that any rallies towards the 1.3370 level might face selling pressure. For traders using derivatives, this outlook favors strategies that benefit from low volatility, such as selling strangles with strikes set outside the 1.3290-1.3365 range. Given the risk of a sharper drop in GBP, holding a slight bearish position could be wise. Buying cheaper, out-of-the-money puts below 1.3200 could serve as a good hedge, especially since current low implied volatility makes these options affordable. This situation feels reminiscent of the volatile market conditions we encountered in the latter half of 2024, when central bank policies were also diverging. During that time, range-trading strategies were effective until a clear trend developed. We should remain cautious about any potential breakout, but for now, it seems the most likely path is sideways. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now