The Pound Sterling (GBP) is doing well compared to other G10 currencies, second only to the Norwegian Krone (NOK). Driven by positive market sentiment, GBP has risen by 0.6% against the USD, continuing its rally since the recent budget announcement.

Currency Trader Insights

Risk reversals for GBP have improved, reaching levels not seen since late August. This was a time when concerns about Chancellor Reeves were high. The Bank of England’s Mann, known for a neutral to hawkish stance, is expected to speak at noon. The FXStreet Insights Team gathers observations from top experts. They offer insights from both commercial sources and various analysts. The Pound is showing strong performance, leading its G10 peers as market sentiment improves. This seems to be a continuation of the rally that started after the recent budget announcement. There is widespread buying of Sterling against most major currencies. In the derivatives market, this means a significant drop in the cost of protection against a decline in the Pound. One-month 25-delta risk reversals for GBP/USD have bounced back to -0.4%, a level not seen since late August 2025, and a big improvement from the -1.3% premium for puts seen in early November. This indicates traders are much less worried about a near-term drop in the currency.

Market Confidence with Fiscal Policies

This situation makes selling cash-secured puts on GBP a more appealing strategy for earning premium. The sharp drop in implied volatility sharply contrasts with the market turmoil after the 2022 mini-budget, showing that fiscal credibility is returning. The market seems confident in the strategy outlined by Chancellor Reeves in the November 2025 Autumn Statement. This positive sentiment aligns with recent fundamental data, such as the UK CPI report for October 2025, which showed inflation cooling to 2.8%, a bit below expectations. This may give the Bank of England more flexibility, boosting risk assets. Additionally, UK GDP for the third quarter of 2025 reported a modest 0.2% growth, easing fears of a severe recession. Traders should pay attention to comments from Bank of England officials, including today’s scheduled remarks from Catherine Mann. Although the trend is positive, any unexpectedly hawkish statements could quickly create market volatility. For now, the lower cost of options suggests that bullish strategies, like call spreads, could provide good risk-reward opportunities as we approach year-end. Create your live VT Markets account and start trading now.

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