GBP/USD has climbed to nearly 1.3250 as the US Dollar weakens. There’s growing expectation for a rate cut from the Federal Reserve in December. Markets now see an 87% chance of a 25 basis points cut next month, up from 39% last week. They also anticipate three more cuts by 2026. The chance of Kevin Hassett becoming the next Fed chair strengthens these expectations, as he supports lower rates. The British Pound is gaining ground, boosted by UK Chancellor Rachel Reeves’ budget, which emphasizes fiscal discipline but is moderated by forecasts from the Office for Budget Responsibility.

Pound Sterling Trends

The GBP/USD pair continues to rise for the seventh day in a row, trading around 1.3240. Early economic forecasts have influenced market sentiment, indicating weaker growth but revealing a larger fiscal buffer, which stabilizes the Pound. The Pound Sterling, the oldest currency still in use, is among the most traded currencies globally. Its value largely depends on the Bank of England’s monetary policy, which aims for price stability through interest rates. Economic data on GDP and trade balances also impact Sterling, reflecting the economy’s strength and potential interest rate movements. The US Dollar is losing strength amid strong expectations for a Federal Reserve rate cut in December. Markets are now estimating over an 87% probability for a cut, bolstered by US core inflation data for October 2025, which fell slightly below expectations at 2.8%. This situation creates a favorable path for the Fed to ease its monetary policy. Meanwhile, the Pound Sterling is gaining strength, partly due to different economic conditions in the UK. The latest inflation data shows UK inflation at 3.1% for October, suggesting that the Bank of England is unlikely to follow the Fed and cut rates soon. This growing gap in policy positions between the two central banks explains the Pound’s strength against the Dollar.

Currency Pair Strategies

This backdrop supports the recent gains in GBP/USD, which has risen for seven consecutive sessions. Reflecting on the Fed’s easing cycle in 2019, we remember a similar phase of Dollar weakness that benefitted currency pairs like Cable. The possibility of Kevin Hassett leading the Fed enhances the long-term outlook for US rates being dovish. In the upcoming weeks, consider preparing for more GBP/USD gains before the crucial December Fed meeting. Buying call options with a strike price near 1.3300 could effectively capitalize on this upward trend. Implied volatility for options expiring next month is already at a three-month high of 9.5%, indicating the market expects a significant movement. For those looking to manage costs during this higher volatility, a bull call spread may be a more sensible approach. We are monitoring the 1.3250 level as crucial support for the ongoing rally. Chancellor Reeves’ commitment to fiscal discipline provides a stable foundation for the Pound, assuming economic growth aligns with the OBR’s projections. Create your live VT Markets account and start trading now.

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