Insights 
VT 
Pound Sterling Forecast Update
Last week, there was negativity around GBP’s momentum. Despite a short rise to 1.3390, the downward trend has eased, with GBP projected to trade within 1.3320 to 1.3475 for now.
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Following a break above our previous resistance level, downward momentum for the pound has faded. We now expect GBP/USD to trade within a range for the next few weeks. The new boundaries are likely to be between 1.3320 and 1.3475.
Market Strategies and Observations
This view is reinforced by recent economic data and central bank policy. The Bank of England has held its main interest rate at 5.25% for over a year now, citing stubborn inflation which, as of September 2025, remains at 3.1%. This policy provides a floor for the pound but with UK GDP growth for Q3 2025 coming in at a sluggish 0.1%, there is little to fuel a major rally.
For derivative traders, this environment suggests that options might be pricing in more movement than is likely to happen. Selling volatility through strategies like short strangles with strikes placed above 1.3475 and below 1.3320 could be a viable approach. This allows traders to profit from time decay as long as the pound remains within this expected channel.
An iron condor is another strategy that fits this market outlook, offering a clearly defined risk and reward. The Cboe Sterling Volatility Index (BPVIX) has recently fallen to 8.1, reflecting the market’s low expectation of sharp price swings and supporting trades that benefit from stability. Looking back, this is a level of calm we haven’t consistently seen since early 2022.
The US dollar side of the pair is also contributing to this sideways movement. The Federal Reserve is signaling a continued pause on rates, especially after the latest Non-Farm Payrolls report for September 2025 showed job growth moderating. This removes a key driver for dollar strength and helps keep GBP/USD contained.
To maintain the current mild upward bias within the range, the pound must stay above 1.3360. This level now acts as an important minor support. A break below this would suggest that the period of range-trading may be ending sooner than anticipated.
