The British pound is falling against the US dollar for the fourth straight day, reaching a low of 1.3116. This drop is mainly due to a stronger US dollar and expected interest rate cuts by the Bank of England next week. The pound’s decline is influenced by positive news about a trade deal between the US and China, along with reduced expectations for a more lenient Federal Reserve in December. The US Dollar Index, which tracks the dollar against six major currencies, is near a three-month high at 99.70.

Financial Market Movements

Other financial markets are also affected, with the EUR/USD pair dropping to a three-month low due to similar pressures from the strong dollar. Market volatility highlights the need for caution when navigating financial markets, as there are inherent risks involved. The pound has broken through the key support level of 1.3140, which we have monitored since summer. This sharp four-day decline indicates a strong downward trend. Looking ahead, bearish strategies for the GBP/USD pair are likely to be a major focus. The US dollar remains strong after the Federal Reserve signaled a more aggressive approach, while the Bank of England is expected to cut rates next week. Recent UK inflation data for September 2025 showed a drop to 1.8%, missing targets again and providing the BOE with motivation to act. The growing gap between the two central banks is driving the GBP/USD pair lower. We are considering buying put options to profit from further declines towards the psychological level of 1.3000. Given the uncertainty surrounding next week’s Bank of England meeting, a bear put spread might be a wise way to manage risk. Implied volatility in GBP/USD options has risen above 12%, suggesting that the market is expecting significant changes.

Broad Dollar Strength

This situation reflects overall dollar strength, not just weaknesses in the pound. Today’s US jobs report, which showed an increase of 210,000 jobs, reinforces the Fed’s hawkish stance. We are also looking at trades that favor the dollar against other currencies, as the US Dollar Index remains strong above 99.50. This scenario is reminiscent of the 2021-2022 period when a hawkish Fed and a hesitant BOE led to a significant decline in the pound. This historical context indicates that the trend may continue if the central banks maintain their differing approaches. Any rallies in the GBP/USD should be approached with caution for now. Create your live VT Markets account and start trading now.

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