The Pound Sterling has made a slight recovery after the Bank of England decided to keep interest rates the same. However, Governor Andrew Bailey seems likely to cut rates in December, which has a 70% chance of happening according to current market pricing. This could lead to lower short-term rates and a weaker pound. It’s expected that the EUR/GBP might get support near the 0.8760 level. As we approach the Budget announcement later this month, it’s anticipated to trade above 0.88, which could change market dynamics.

Bank Of England Holds Rates Steady

Yesterday, the Bank of England decided not to change interest rates, giving the pound a brief boost. But with Governor Bailey hinting at a possible rate cut next month, there are worries for Sterling’s value. The market is currently pricing a 70% chance of a December cut, which may be too low. Recent economic data supports this view. The latest figures from the Office for National Statistics show that headline inflation for October 2025 has dropped to 2.1%, just above the Bank’s target of 2%. Additionally, GDP growth for the third quarter was only 0.1%. These statistics give the monetary policy committee a reason to consider stimulating the economy. For those trading derivatives, buying GBP put options that expire after the December meeting may be a smart move to bet on a weaker pound. With the current pricing, these options could be valuable as the likelihood of a rate cut increases. This strategy aims to profit from the anticipated decline in Sterling as the market adjusts to new expectations. We are also keeping an eye on the EUR/GBP pair, which should find solid support around the 0.8760 level. We expect it to trade above 0.88 as we near the government Budget statement later this month. Traders can consider using call options on EUR/GBP to capitalize on this expected rise.

Repricing Of UK Interest Rates

In addition to currency movement, the adjustment of UK interest rates offers a chance for profit. Short-term UK rate futures aren’t fully accounting for the possibility of a rate cut, similar to what we noticed during the easing cycle in 2019. This creates an opportunity to position for lower rates as the market aligns with the Bank’s signals. Create your live VT Markets account and start trading now.

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