GBP/USD stays above 1.3350 after strong gains as investors await Bank of England decisions
by VT Markets
/
Aug 7, 2025
GBP/USD is holding steady above 1.3350 after significant gains, as traders await the Bank of England’s policy decisions. The US Dollar’s decline, driven by concerns over tariffs, has fueled this upward trend in the GBP/USD pair.
On Thursday, GBP/USD hit 1.3355, with all eyes on the upcoming Bank of England meeting. Key aspects to watch include the voting behavior of the Monetary Policy Committee and possible future interest rate changes.
Most expect the central bank to cut interest rates by 25 basis points to 4.00%. There’s also some speculation about a larger, 50 basis point cut, which could affect the value of the pound.
Looking back a few years, GBP/USD was also above 1.3350 before a significant Bank of England meeting. At that time, a weaker US dollar helped boost the pound. This past situation offers useful insights for today.
Back then, the main question was whether the bank would cut rates by 25 or 50 basis points. This uncertainty created a great chance to trade volatility with options. A long straddle strategy, where both a call and a put option were purchased, would have profited from a major price move in either direction.
This scenario is relevant today. Recent data for July 2025 shows UK core inflation stubbornly holding at 3.1%, slightly above expectations. This creates uncertainty about the Bank of England’s next steps, which the market currently thinks will be to hold rates steady. Implied volatility for one-month GBP/USD options rose to 8.2% this week, indicating nervousness in the market.
Given this, we believe a similar options strategy could work well in the coming weeks. While the past situation suggested a dovish surprise, today’s market faces the risk of a hawkish surprise due to ongoing inflation. Buying out-of-the-money call options could be a cost-effective way to get ready for a potential sharp increase in the pound if the Bank surprises with a hawkish stance.
by VT Markets
Aug 7, 2025
Insights 
VT 
