Insights 
VT 
GBP/USD fell by 0.21% to 1.3326 after UK inflation figures were lower than expected, leading to increased anticipation of a Bank of England interest rate cut. Currently, markets are pricing in 20 basis points of easing for December, up from 11 basis points.
The US Dollar strengthened due to trade tensions and demand for haven assets, with Gold rising by over 1%. In the US, September saw a 1.5% rise in Existing Home Sales, recovering from a 0.2% contraction in August.
Investor Focus
Investors are focused on the upcoming US Consumer Price Index report, which estimates an inflation rate of 3.1%. Trade rhetoric from the White House concerning China has added to market anxiety, boosting demand for the US Dollar and Gold.
In the UK, inflation remained flat in September, causing the BoE’s rate cut probability to increase from 11 to 20 basis points. Despite currency pressures, the interest rate gap between the US and UK suggests potential strength in the GBP/USD pairing.
The technical analysis indicates that GBP/USD could extend its slide, challenging levels including 1.3300, 1.3248, and possibly 1.3141. However, if it rises above 1.3400, it may meet resistance at the 50-day and 100-day Simple Moving Averages at 1.3461 and 1.3479, respectively.
We’re seeing clear signs to position for a weaker British Pound against the US Dollar. The recent UK inflation data for September 2025 came in at just 2.1%, missing forecasts and fueling speculation that the Bank of England will have to cut rates to support the economy. This policy divergence creates a compelling case for shorting the GBP/USD pair, as overnight index swaps now show a 75% probability of a rate cut by December.
Trading Strategy
For the coming weeks, buying put options on GBP/USD with a strike price below 1.3300 seems like a prudent strategy. This allows us to profit from a potential slide towards the 1.3250 level while strictly defining our maximum risk to the premium paid for the option. Looking back at the 2022-2023 period, we saw how diverging central bank policies could create sustained, profitable trends in major currency pairs.
The case is strengthened by continued demand for the US Dollar, which is acting as a safe haven amid ongoing trade friction with China. With US inflation data for September expected tomorrow and recent readings still hovering above 3%, the Federal Reserve has little room to consider easing monetary policy. This reinforces the dollar’s strength and adds another layer of pressure on the GBP/USD exchange rate.
We must also watch the upcoming UK budget announcement next month, which is expected to introduce fiscal tightening through tax hikes and spending cuts. Such austerity measures could further dampen UK economic growth prospects and weigh heavily on Sterling. This event could be a key trigger for another leg down in the pair, making options that expire after the budget announcement particularly interesting.
