The UK will release its GDP and Industrial Production data for October. The Office for National Statistics expects to announce a 0.1% increase in GDP, bouncing back from the previous month’s decline. Industrial Production is anticipated to grow by 0.7% after falling by 2% in September. However, the annual Industrial Production may drop by 1.2%, following a previous decline of 2.5%.

GBP in Bullish Territory

The GBP/USD is performing well, reaching a resistance level of 1.3400. The Federal Reserve’s interest rate cut has boosted risk appetite, causing the USD to weaken. Fed Chair Jerome Powell mentioned that further rate changes are unlikely until 2026, with only two more cuts expected in the next two years. Traders are speculating on a quicker rate-cutting pace next year. After the Fed’s 25-basis-point cut and a disappointing jobs report, the Pound Sterling increased by over 0.68%. The GBP/USD hit 1.3417, the highest level in six weeks. US Initial Jobless Claims rose to 236,000, up from 192,000. Continuing Claims decreased from 1.937 million to 1.838 million, according to the Department of Labor.

Federal Reserve Policy

The Federal Reserve’s recent interest rate cut is boosting market confidence and weakening the US dollar. Although the Fed suggests no rate changes until 2026, the market is pricing in a more aggressive rate-cutting cycle for next year. This difference is currently driving currency movements. Recent data aligns with this perspective. The latest Consumer Price Index (CPI) report shows inflation eased to 3.1% year-over-year, giving the Fed more flexibility to cut rates. Meanwhile, initial jobless claims have climbed to 236,000, indicating some softness in the labor market. This combination supports a bearish outlook for the dollar. Even though the pound has rallied to a six-week high above 1.3400, its strength is uncertain. The UK economy unexpectedly contracted by 0.1% in October, missing expectations for slight growth. This negative news raises concerns about the pound’s upward momentum. Taking a closer look, we find that UK GDP has been mostly flat over the past year, with recent ONS data showing only a 0.2% growth in the third quarter of 2025. The Bank of England has also taken a cautious approach by keeping rates steady to combat persistent core inflation above its 2% target. This difference in policy compared to the Fed may limit how high the pound can rise. Due to these mixed signals, we anticipate increased volatility in GBP/USD in the coming weeks. The rally driven by US dollar weakness may encounter headwinds from the UK’s poor economic data. Traders might consider options strategies that benefit from significant price fluctuations instead of predicting a single direction. We’ve seen a similar situation in the years after the 2008 financial crisis. Aggressive Fed easing weakened the dollar, but economic issues in the UK limited the pound’s gains. That era was characterized by sharp reversals and erratic trading within a wide range. This historical context suggests caution for anyone with a strong directional opinion right now. Create your live VT Markets account and start trading now.

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