The Pound Sterling weakened against the US Dollar, with the GBP\/USD trading around 1.3150 due to concerns over the UK’s fiscal discipline and political stability. The UK government has also decided against raising income taxes ahead of the November budget, aiming to address a \u00a330 billion fiscal deficit through alternative revenue measures.<\/p>\n
Despite a positive momentum on Thursday, the GBP\/USD pair faced pressure from weak GDP growth data and the UK Prime Minister’s decision to cancel tax increase plans. The US government’s reopening is expected to affect the market with the release of delayed economic data, including the anticipated release of the September Nonfarm Payrolls report next week.<\/p>\n
US Dollar weakness contributed to the GBP\/USD rise to a two-week high of 1.3197, influenced by the reopening of the US government and subsequent economic data releases. Nonetheless, traders remain cautious due to possible future US government shutdowns and the impact this might have on economic data availability and Federal Reserve decisions.<\/p>\n
The UK government’s decision to scrap planned income tax hikes is creating serious doubt in the market ahead of the November 26 budget. With a \u00a330 billion fiscal gap to fill, this move signals potential weakness in managing public finances. This is especially concerning as public debt has remained elevated near 99% of GDP for most of 2025, drawing uncomfortable parallels to the market turmoil we saw back in 2022.<\/p>\n
For us, this points directly to rising volatility in Pound Sterling over the next few weeks. One-month implied volatility on GBP\/USD has already climbed to over 8%, up from closer to 6% last month. Traders should consider strategies like straddles or strangles on Cable to profit from a significant price move, regardless of the direction after the budget is announced.<\/p>\n
On the other side of the trade, the US Dollar is drifting as we await delayed economic data following the government reopening. The market is especially desperate for the October inflation and jobs numbers to gauge the Federal Reserve’s next move. September\u2019s Core PCE inflation was still running at 2.8% year-over-year, making the Fed’s decision far from certain.<\/p>\n
This data void makes trading US interest rate futures a high-stakes game right now. Currently, fed funds futures are pricing in a 60% probability of a 25-basis-point rate cut on December 10. A hot inflation or jobs report next week could easily swing those odds and cause sharp moves in the dollar.<\/p>\n
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