Pound Sterling (GBP) is struggling against major currencies, except the Japanese Yen (JPY). Pressure is building as the Bank of England (BoE) may start easing monetary policy in December. GBP/USD is projected to trade between 1.3120 and 1.3185. In the long run, analysts believe it could rise within the range of 1.3065 to 1.3230. Meanwhile, EUR/GBP has climbed above 0.88 after the UK reported softer unemployment figures in September.

USD/JPY Trends

The USD/JPY is close to a nine-month high due to Japan’s fiscal policies. At the same time, NZD/USD has seen a slight increase as risk sentiment improves with expectations of a rate cut from the RBNZ. GBP/USD has recovered most of its earlier losses, moving above 1.3100. FXStreet warns that any forecasts come with risks and uncertainties. With the Bank of England likely to resume monetary expansion in December, we expect the pound to lag behind its peers. UK inflation data for October showed an annual rate drop to 3.1%, prompting the Monetary Policy Committee to consider a rate cut. This marks a significant change from the persistent inflation experienced in 2023 and 2024. For traders dealing in derivatives, a range-bound strategy for GBP/USD looks promising, likely staying between 1.3065 and 1.3230 in the upcoming weeks. Selling volatility using options, like a short strangle with strikes outside this range, could effectively generate premium. This method profits from the currency pair remaining stable rather than making a significant move in either direction.

Market Implications and Strategies

This situation contrasts with the United States, where Fed officials are worried about inflation, which limits the dollar’s decline. The latest Core PCE data in the U.S. remains stubborn at 3.5%, highlighting the policy gap between a dovish BoE and a more cautious Fed. This dynamic is likely to cap any major rallies for GBP/USD. We also notice the pound weakening against the euro, with EUR/GBP trading above 0.88. This follows unexpectedly soft UK unemployment data for September, which increased the rate to 4.5%. This trend suggests that taking long positions in EUR/GBP, possibly through futures or call options, could serve as a valuable hedge against further pound weakness. Despite the broader market’s positive mood, as shown by the Dow Jones reaching an all-time high, sterling is not getting much support. Domestic economic issues and the anticipation of lower interest rates are weighing it down. Therefore, we believe the pound’s performance will be influenced more by local monetary policy than by global market sentiment. Create your live VT Markets account and start trading now.

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