GBP/USD decreased by 0.21% to 1.3326 after the UK’s inflation data came in lower than anticipated. This has raised expectations for a potential interest rate cut from the Bank of England. Currently, the market is now expecting 20 basis points of easing in December, up from the previous 11. The US Dollar gained strength amid trade tensions and increased demand for safe-haven assets, with Gold rising over 1%. In the US, Existing Home Sales rose by 1.5% in September, bouncing back from a 0.2% drop in August.

Investor Focus

Investors are watching closely for the upcoming US Consumer Price Index report, which is expected to show an inflation rate of 3.1%. Trade comments from the White House regarding China have heightened market concerns, increasing demand for the US Dollar and Gold. In the UK, inflation remained unchanged in September, pushing up the likelihood of a rate cut from the BoE from 11 to 20 basis points. Despite pressure on the currency, the difference in interest rates between the US and UK points to potential strength in the GBP/USD pair. Technical analysis suggests that GBP/USD may continue to decline, testing levels at 1.3300, 1.3248, and potentially reaching 1.3141. However, if it rises past 1.3400, it may face resistance around the 50-day and 100-day Simple Moving Averages at 1.3461 and 1.3479, respectively. There are clear indicators to bet on a weaker British Pound against the US Dollar. Recent UK inflation data for September 2025 showed just 2.1%, falling short of predictions and raising speculation that the Bank of England may need to cut rates to support the economy. This divergence in policies strengthens the case for shorting the GBP/USD pair, as overnight index swaps now indicate a 75% chance of a rate cut by December.

Trading Strategy

In the coming weeks, buying put options on GBP/USD with a strike price below 1.3300 appears to be a smart move. This strategy allows us to profit from a potential decline towards the 1.3250 mark while limiting our risk to the option premium paid. Reflecting on the 2022-2023 period, we see how differing central bank policies can create sustained and profitable trends in major currency pairs. This case is further supported by a continued demand for the US Dollar as a safe haven amid ongoing trade issues with China. With US inflation data expected tomorrow and recent figures staying above 3%, the Federal Reserve has little choice but to avoid easing monetary policy, reinforcing the dollar’s strength and adding pressure on the GBP/USD exchange rate. We should also monitor the upcoming UK budget announcement next month, which is expected to introduce fiscal tightening with tax increases and spending cuts. Such austerity measures may dampen UK economic growth prospects and put additional strain on the Pound. This event could serve as a significant trigger for another decline in the pair, making options that expire after the budget announcement particularly appealing. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now