The GBP/USD pair remains strong, staying above the 200-day moving average after a recent rally. The recent DMP survey indicates that while wage growth is slowing, it is not seen as an obstacle for the Bank of England to implement further rate cuts.
In the coming year, firms anticipate the annual wage growth to decrease to 3.6% from 3.8% observed in October. The expectations for inflation one year ahead remain steady at 3.4% for the fourth month in a row, while the three-year inflation outlook increased slightly to 3.0%.
Swaps Curve Predictions
The swaps curve suggests a reduction of 66 basis points in the policy rate, predicting it to bottom between 3.25% and 3.50% over the next twelve months. It is anticipated that GBP will continue to underperform against other currencies in the coming period.
This information is curated by the FXStreet Insights Team, which compiles market observations from renowned sources, providing notes and insights both commercially and in collaboration with external analysts.
Given the current date of December 4, 2025, we see a temporary strength in the Pound, which is holding above its 200-day moving average of 1.3326. However, underlying data on wage growth, which is expected to slow to 3.6%, suggests this strength may not last. This creates a prime opportunity to look at strategies that benefit from a potential fall in the currency’s value.
Traders should consider buying put options on GBP/USD with strike prices below the 1.3300 level. The market is already pricing in 66 basis points of rate cuts from the Bank of England over the next twelve months. This strong expectation of monetary easing makes puts a direct way to position for the anticipated decline in the pound.
Strategic Considerations
This view is strengthened by recent statistics, as last week’s preliminary Q3 GDP data for 2025 showed a slight contraction of 0.1%. This weak growth figure increases the pressure on the Bank of England to cut rates sooner rather than later to stimulate the economy. The data provides a fundamental reason for the pound to weaken despite its current technical footing.
Looking back, we saw a similar pattern in late 2019 before the easing cycle of 2020, where market expectations for rate cuts ran ahead of the central bank’s actual moves. In contrast, the US Federal Reserve’s latest commentary continues to signal a steady policy path, creating a clear divergence that favors the US dollar. This makes a short GBP/USD position particularly attractive.
Given the expectation that the pound will underperform on the crosses, traders might also find value in other pairs. We believe buying call options on EUR/GBP could be an effective strategy. This allows for a position that profits from Sterling weakness without being exposed to shifts in US dollar sentiment.
