**Despite Positive UK Economic Forecasts** The main support level for GBP/USD is 1.3200, with additional support at the 20-day SMA of 1.3153. The British Pound has shown mixed performance against major currencies. It is weaker against the Swiss Franc but stronger compared to others. The heat map indicates varied strength among currencies. Currently, we have a unique situation where both the Federal Reserve and the Bank of England are expected to cut rates this month. Markets predict an 87% chance of a Fed cut and a 90% chance for the BoE. The big question is which central bank will take a more aggressive approach to easing. This uncertainty ahead of December’s meetings could lead to increased volatility. **The Recent US ISM Manufacturing Print** The latest US ISM Manufacturing report shows a reading of 48.2, indicating a ninth month of contraction—the longest since the slowdown of 2019, which led to a series of Fed cuts. Weak industrial data, along with last week’s Core PCE inflation figure of 2.8%, strengthens the case for the Fed to take action. Derivatives pricing on Fed Funds futures suggests the possibility of another 50 basis points cut through the first half of 2026. In the UK, political issues after the OBR chief’s resignation are putting pressure on the Bank of England. Although house prices slightly increased in November, retail sales last month dropped by 0.5%, signaling weak consumer demand. Consequently, markets are pricing in a 90% chance of a rate cut, making long positions in GBP vulnerable to any dovish surprises from the BoE. Given the high event risk, it’s essential to consider options for managing positions or speculating on a breakout in GBP/USD. Implied volatility for December expiries is high, suggesting that a straddle or strangle strategy could be effective for capitalizing on a significant price move in either direction following the announcements. Key strike prices to watch are around 1.3300 for resistance and 1.3150 for support. The decline of the dollar carry trade, which was popular throughout 2024, is speeding up as expectations for Fed cuts become clearer. However, with the BoE also likely to cut rates, the interest rate difference may not shift significantly in favor of sterling just yet. Traders should keep an eye on the forward rate agreements for both currencies to assess which one is being viewed more dovishly in the coming months. Create your live VT Markets account and start trading now.

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