Insights 
VT 
The Pound Sterling (GBP) remains mostly unchanged, with a slightly weak undertone, according to Scotiabank’s Chief FX Strategists. Market focus is on possible policy changes by Chancellor Reeves in the upcoming budget, potentially impacting GBP stability.
There is speculation that income taxes may rise by 2p, which could negatively affect economic growth and pressure the GBP. Currently, GBP finds support at 1.3140, a crucial level seen in May and August, with the risk of dropping to the mid-1.29 area if it falls below this point. Resistance stands at 1.3245.
Market Observations and Insights
The FXStreet Insights Team compiles selected market observations from experts, providing notes and insights from both commercial analysts and additional internal and external analysts. The emphasis is on offering a clearer understanding of market dynamics and forecasts.
We’re seeing the pound holding steady for now, but the overall feeling is weak. All eyes are on Chancellor Reeves’s upcoming budget, which is creating a lot of uncertainty. This is the main event we need to position for in the coming weeks.
The latest speculation of a 2p income tax increase is particularly concerning for the pound’s value. The most recent GDP figures for the third quarter of 2025 showed a meager 0.1% growth, confirming fears of a slowing economy. A tax hike now would likely dampen consumer spending further, a pattern we saw hinder recovery in the early 2020s.
Strategic Trading Approach
Given this backdrop, we think buying put options on GBP/USD is a sensible strategy to position for a potential drop. These options provide downside exposure if the pound weakens after the budget announcement. This is a more controlled way to take on risk compared to shorting the currency directly.
The key level we are watching is 1.3140, a support line that held firm back in May and August of this year. A decisive break below this price would signal a stronger downward move. Our target in that scenario would be the mid-1.29 area, offering a clear objective for these bearish trades.
For those less certain on the direction but expecting a sharp move, we are also considering options that profit from a spike in volatility. The budget is exactly the kind of event that can cause a gap in prices, and a break above resistance at 1.3245 could also trigger a sharp rally. Being prepared for a significant move in either direction is prudent.
