The Pound Sterling has dropped to about 1.3430 against the US Dollar due to rising demand for the Greenback. This comes as several officials from the Federal Reserve (Fed) are set to speak, with many expecting two more interest rate cuts this year. According to the CME FedWatch tool, traders believe there is an 81.5% chance of these cuts. The US Dollar Index has also risen by 0.25%, reaching around 98.35 amid political uncertainty in Japan and France. On Tuesday during the European session, the Pound Sterling fell by 0.3% against the US Dollar. Concerns about the UK labor market are growing, leading to speculation that the Bank of England (BoE) might lower interest rates again. Traders are looking forward to BoE Pill’s speech for clearer guidance on future policy decisions.

Technical Analysis Overview

Technical analysis shows that the Pound Sterling is under pressure near the 20-day Exponential Moving Average (EMA). The GBP/USD pair is currently close to 1.3440, with key support at the August low of 1.3140 and resistance at the September high of 1.3726. Investors are awaiting speeches from several Fed officials to assess the US labor market, especially since there hasn’t been recent economic data due to the US government shutdown. Despite expectations for Federal Reserve rate cuts, the Pound Sterling is weakening due to safe-haven demand for the US Dollar. This indicates that geopolitical issues, particularly the political uncertainty in France and Japan, are currently more influential than monetary policy forecasts. Derivative traders should be cautious, as this “risk-off” sentiment can be unpredictable and is driving current price movements. The fundamental case for a weaker dollar remains strong, with expectations of two more Fed rate cuts before the end of the year. Recent data supports this view, as the September 2025 US Consumer Price Index (CPI) report showed inflation cooling to 2.8%, giving the Fed more room to adjust policy. This backdrop suggests that the dollar’s current strength may be temporary, making the trading environment complex.

UK Economic Pressure

In the UK, concerns about the economy are putting additional pressure on the pound. Recent data from the Office for National Statistics showed that the unemployment rate in the UK rose to 4.5% last month, reinforcing the belief that the Bank of England may soon need to cut rates again. Huw Pill’s upcoming speech will be crucial; any dovish comments could accelerate the decline of the Pound Sterling. The gap between short-term market sentiment and long-term monetary policy is causing increased implied volatility in the GBP/USD options market. We have seen 1-month implied volatility rise to 9.2%, up from 7.5% just a few weeks ago in September 2025. This signals that the market is preparing for larger price fluctuations in the near future. To respond, traders may want to consider buying put options on GBP/USD to protect against further declines toward the 1.3140 support level. A put option with a strike price of 1.3350, expiring in late November, offers a defined-risk strategy to profit if the downward trend continues. This approach safeguards capital while benefitting from falling prices and rising volatility. Alternatively, for those who think the dollar’s strength is too high, selling cash-secured puts with a strike price significantly below the current level—possibly around 1.3200—might be a good strategy. This method allows traders to collect premiums while betting that the August 2025 low will act as a strong support level. It assumes that fundamental factors, like the Fed’s easing cycle, will eventually return to dominate this currency pair. Create your live VT Markets account and start trading now.

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