Insights 
VT 
Recent UK data showing stronger industrial sector activity helped the Pound Sterling (GBP) gain after finding support around the 1.32 level. Bank of England members have discussed the ongoing inflation challenges, suggesting a “more restrictive for longer” policy stance may be necessary.
This stronger data and the possibility of the Bank of England maintaining its current position through early 2026 could support the pound. However, short-term charts indicate a slight risk of softness, with the 6-hour chart suggesting a potential top due to a bearish pattern observed in the European morning session.
Promising Weekly Charts
Despite short-term fluctuations, weekly charts for GBP/USD show promising trends through a bullish ‘engulfing’ pattern. Short-term losses might reach 1.34 or just below, but support should hold. Resistance is seen at 1.3470/75, with potential to return to mid-1.35 levels.
The pound is finding solid ground, supported by strong UK economic activity. We’ve seen this week’s industrial production numbers show a 0.4% rise for August, helping build confidence after the spot price found firm support around the mid-1.32 area. This strength comes even as the GBP/USD pair pulls back slightly from its recent highs.
The Bank of England’s firm stance against inflation is the key factor keeping the pound propped up. With September’s CPI data released yesterday showing inflation holding stubbornly at 2.8%, comments from policymakers about keeping rates “restrictive for longer” at the current 5.25% seem highly credible. This contrasts with growing market chatter that the US Federal Reserve might pause its own tightening cycle, creating a favorable outlook for sterling.
For derivative traders, this suggests any short-term dips towards the 1.3400 level should be viewed as potential entry points. We believe selling out-of-the-money puts with strike prices around 1.3350 could be a viable strategy to collect premium, capitalizing on the strong underlying market support. This approach aligns with the weekly chart’s bullish “engulfing” pattern, which points to upward momentum despite the immediate softness.
Upside Strategies
On the upside, call options with strike prices above the 1.3475 resistance level look interesting as we head towards month-end. A clean break of this area could quickly trigger a move towards the mid-1.35s, a level we haven’t consistently held since the third quarter of 2024. Given the fundamental backdrop, we see the risk skewed towards a stronger pound in the coming weeks.
