Insights 
VT 
The Pound Sterling has seen a modest recovery following the Bank of England’s decision to keep rates unchanged. However, Governor Andrew Bailey appears inclined towards a rate cut in December, a move currently priced with a 70% probability. This suggests potential for lower short-term rates and a weaker pound.
There is an expectation that the EUR/GBP could find support if it approaches the 0.8760 level. It is anticipated to trade above 0.88 as the Budget approaches later this month, which may impact market dynamics.
Bank Of England Holds Rates Steady
The Bank of England held rates steady yesterday, giving the pound a brief lift. However, with Governor Bailey now appearing to favour a rate cut next month, we see downside risks for Sterling. The market is only pricing in a 70% chance of a December cut, which seems too low.
This view is strengthened by recent economic data. The latest ONS figures for October 2025 show headline inflation has fallen to 2.1%, just above the Bank’s 2% target, while Q3 GDP growth was a sluggish 0.1%. These numbers give the monetary policy committee a clear reason to stimulate the economy.
For derivative traders, this situation suggests that buying GBP put options that expire after the December meeting could be a good way to position for a weaker pound. The current pricing means these options may offer value as the probability of a cut increases. This strategy would profit from the expected fall in Sterling as the market adjusts.
We are also looking at the EUR/GBP pair, which should find strong support around the 0.8760 mark. We expect the cross to trade above 0.88 as we get closer to the government’s Budget statement later this month. Call options on EUR/GBP could be used to position for this upward move.
Repricing Of UK Interest Rates
Beyond currency, the repricing of UK interest rates presents an opportunity. Short-term UK rate futures are not fully reflecting the likelihood of a cut, a scenario we also observed during the 2019 easing cycle. This creates a chance to position for lower rates as the market catches up to the Bank’s guidance.
