The GBP/USD pair is on the rise, trading around the mid-1.3400s. This improvement comes as the US dollar weakens, marking a third straight day of gains after earlier dipping to around 1.3250. However, uncertainties about the UK’s financial outlook and the decisions by the Bank of England (BoE) limit further increases. Technical indicators show a breakout above the 100-period Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level, which might allow for more upward movement.

Potential Further Gains

If the trend continues, the GBP/USD pair could reach the 1.3480-1.3485 area and possibly break past the 1.3500 mark. Support is found around 1.3400, while corrections may attract buyers at 1.3355, 1.3300, and the previous lows near 1.3250. The Pound Sterling, issued by the Bank of England, is essential in the global foreign exchange market, particularly in pairs like GBP/USD. BoE decisions are influenced by inflation, which, in turn, impacts the GBP’s value. Economic data like GDP and trade balance also play a role in shaping the currency’s strength in global markets. As we progress through October 2025, the Pound is climbing against the Dollar, buoyed by a weaker US Dollar. Last week, the US Consumer Price Index (CPI) reported 2.5%, raising market speculation that the Federal Reserve may be done tightening. This situation opens the door for more gains in the GBP/USD pair. With key technical levels breaking, the GBP/USD may trend toward 1.3485 soon. For those trading derivatives, short-term call options with strike prices around 1.3500 could be valuable to capture this upward potential. The positive chart signals suggest further gains if the US Dollar continues to decline.

Domestic Issues and Caution

That said, we should be cautious about getting too optimistic about the Pound because of ongoing domestic issues. The latest Office for National Statistics data shows UK inflation stubbornly at 2.8% for September 2025, which complicates the BoE’s approach to interest rates. Additionally, the UK’s public sector net debt is now at 99.5% of GDP, presenting significant challenges ahead of the November budget. This uncertainty hints that any drop back toward the 1.3400 level could be rapid. Traders might consider buying put options with strikes below 1.3350 to protect their bullish positions. A strong break below that support level could lead to a swift decline, making such protection worthwhile. Given the mixed signals, we believe strategies that can take advantage of price moves in either direction could be effective. Reflecting on the volatility after the 2022 mini-budget crisis, it’s clear how quickly sentiment can shift based on UK fiscal news. Therefore, setting up straddles or strangles may be a wise way to navigate the expected price fluctuations around the upcoming budget announcement. Create your live VT Markets account and start trading now.

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