Technical Analysis

Right now, the Pound is forming a Head and Shoulders pattern against the US Dollar, trading around 1.3370. The 14-day RSI is close to 40.00, indicating a possible bearish trend if it drops further. Key support levels are the August 1 low of 1.3140, while resistance lies at the 1.3500 psychological level. The UK GDP report is set to release soon, with experts expecting a 0.1% monthly increase. As of today, October 15, 2025, the Pound Sterling is strengthening against the US Dollar, largely because the Federal Reserve is hinting at aggressive interest rate cuts. Fed Chair Powell is concerned about a weak US labor market, and traders now see a 94.6% chance of a 50-basis-point cut by year-end. Last week’s US Core CPI of 3.9% year-over-year also gives the Fed more leeway for cuts. However, the pound’s rise is fragile since the Bank of England may also lower rates. Recent UK data shows unemployment climbing to 4.8% and wage growth slowing to 4.7%, the lowest since mid-2022. This decline from over 6% earlier in 2025 indicates a rapid cooling, which supports rate cuts from the BoE.

Market Outlook

This creates a complex situation for traders since both central banks are planning to ease policies. The focus now is on which bank will act first, with the UK’s monthly GDP data due tomorrow. A disappointing report below the 0.1% consensus could stop the pound’s rally, especially since recent PMI surveys are hovering around the 50 mark. It’s also important to remember that the current rally is counter to a bearish “Head and Shoulders” pattern on the daily chart, suggesting the rise may be short-lived and could drop sharply, similar to a pattern seen in late 2023 that led to a significant decline. The IMF has warned that UK inflation will stay high, complicating the BoE’s ability to make deep cuts as the market hopes. Given these mixed signals, traders should think about using options to manage risk. Purchasing GBP/USD put options allows a trader to bet on a downturn while protecting against potential losses if the rally continues. This strategy is particularly important as the pair approaches the key resistance level of 1.3500, which could limit further gains. Create your live VT Markets account and start trading now.

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