In September, UK industrial production dropped by 2.5% compared to last year, worse than the expected decline of 1.2%. This adds to the negative trend for the Pound Sterling, following several disappointing economic reports. The US Dollar strengthened after a government funding bill ended a 43-day shutdown, impacting currency pairs such as EUR/USD and GBP/USD. Gold prices also rose, reaching a three-week high and reflecting positive sentiment, despite delays in US economic data.

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Stellar (XLM) is showing hope in trading as it approaches a resistance level, which may lead to a price increase. On the other hand, Hyperliquid (HYPE) is struggling due to a loss of $4.9 million that affected its market maker. Looking ahead, discussions about the best forex brokers for 2025 highlighted features like low spreads, high leverage, and regional preferences. Different brokers offer various trading options, showing changes in the brokerage market. The recent drop in industrial production was significant, with a 2.5% contraction compared to the expected 1.2% decline. This confirms our belief that the UK economy is slowing much faster than the market anticipated. We now need to prepare for ongoing economic weakness in the last quarter of 2025. This poor industrial output directly weakens the Pound Sterling. The Bank of England, faced with this slowdown, is unlikely to raise rates and may even hint at future cuts. As a result, we see opportunities to buy put options on GBP/USD, targeting levels below 1.3000 in the coming weeks.

Inflation and Market Impact

This weak manufacturing data is not an isolated incident. It comes after the latest UK CPI report for October, which showed inflation easing to 2.1%. This gives the central bank a stronger reason to take a more cautious approach at its next meeting. The combination of slowing growth and lower inflation is a classic bearish signal for a currency. For UK stocks, this creates a complicated scenario for the FTSE 100. A weaker pound helps international exporters, but a struggling domestic economy harms others. This suggests that index-level volatility may be underestimated. We believe that buying straddles or strangles on the FTSE 100 could be a smart way to trade the expected increase in price fluctuations. We’ve seen similar trends when weak manufacturing data caused market adjustments during the economic slowdown of 2023. In that time, assets closely tied to the UK economy significantly underperformed. This historical context suggests that shorting futures on the more UK-focused FTSE 250 index could be a good hedge or bet. Create your live VT Markets account and start trading now.

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