The Pound Sterling is facing pressure after the Bank of England (BoE) decided to keep interest rates steady at 4%. In a recent meeting, out of nine members in the Monetary Policy Committee, four suggested a 25-basis-point cut, while three disagreed. The BoE pointed out that inflation risks are decreasing and that weak demand might influence short-term inflation. They hinted that further rate cuts could happen if price pressures continue to ease.

The British Pound Weakens

The British Pound is losing strength against major currencies, especially the Japanese Yen. The GBP/USD has gone up slightly to 1.3070 as the US Dollar’s recent rally pauses Recent data from the US shows 42,000 new jobs added in October and an ISM Services PMI of 52.4, which supports the US Dollar. As a result, expectations for a Federal Reserve rate cut in December have dropped from 94.4% to 62.5%. Currently, the GBP/USD stays close to 1.3085, holding around a six-month low of approximately 1.3000. The overall trend is bearish, remaining below the 200-day Exponential Moving Average of 1.3263. The 14-day Relative Strength Index (RSI) has fallen below 30, indicating a bearish trend. Key support is around 1.2700 from April, while the October 28 high at 1.3370 serves as resistance.

BoE Interest Rate Decisions

The BoE makes interest rate decisions eight times a year, impacting the Pound Sterling based on their inflation outlook. Today’s decision from the BoE signals expectations of a weaker Pound Sterling. The vote for a rate cut was closer than anticipated, with four out of nine members advocating for a reduction. This shift suggests that the Sterling may continue to decline in the coming weeks. This change aligns with recent data showing slower inflation and economic activity. The UK’s GDP showed minimal growth of just 0.1% in the third quarter, and the mid-October 2025 data indicates the headline CPI rate dropped to 4.2%. These figures allow the BoE to focus more on growth rather than just controlling inflation, supporting lower rates. Additionally, we should brace for further Sterling weakness ahead of the Autumn Budget this month. Proposed tax hikes from Chancellor Rachel Reeves could hinder consumer spending and business investment. This fiscal tightening contradicts the economy’s needs, adding more downward pressure on the Pound. The case for shorting GBP strengthens when we consider the stronger US economy. Last week’s US Non-Farm Payrolls report revealed a solid gain of 195,000 jobs for October 2025, keeping the Federal Reserve cautious. The policy differences between a dovish BoE and a steady Fed make shorting the GBP/USD pair particularly appealing. For derivative traders, this suggests buying put options on GBP/USD or taking bearish futures positions. The pair is already trading below its 200-day moving average, and with the RSI displaying bearish momentum, the technical indicators back the fundamental outlook. Our initial target for these positions is the April 2025 low near 1.2700. Create your live VT Markets account and start trading now.

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