The Pound Sterling experiences sales pressure after the Bank of England (BoE) decides to keep interest rates steady at 4%. Out of nine Monetary Policy Committee members, four propose a 25-basis-point reduction, while three oppose.

BoE indicates risks to inflation are declining and weak demand may affect short-term inflation. BoE suggests more interest rate cuts could occur if price pressures decrease further.

The British Pound Weakens

The British Pound weakens against major currencies, notably the Japanese Yen. The GBP/USD has a slight rise to 1.3070 as the US Dollar’s rally pauses.

Recent US data, including 42,000 new jobs in October and an ISM Services PMI of 52.4, supports the US Dollar. Expectations for a Federal Reserve rate cut in December decrease from 94.4% to 62.5%.

The GBP/USD remains near 1.3085, holding a six-month low around 1.3000. The pair’s trend is bearish, below the 200-day Exponential Moving Average at 1.3263.

The 14-day Relative Strength Index falls under 30, signalling a bearish trend. Key support is seen near April’s 1.2700, while the October 28 high at 1.3370 poses resistance.

BoE Interest Rate Decisions

BoE interest rate decisions, typically eight per year, impact Pound Sterling based on their inflation outlook approach.

Today’s Bank of England decision is a clear signal for us to anticipate a weaker Pound Sterling. The vote to cut rates was much closer than we expected, with four out of nine members already pushing for a reduction. This dovish shift suggests the path of least resistance for Sterling is downwards in the coming weeks.

This pivot from the BoE is supported by recent data showing slowing inflation and economic activity. We saw in the third-quarter GDP figures that the UK economy grew by a mere 0.1%, while the latest Office for National Statistics data from mid-October 2025 showed the headline CPI rate fell to 4.2%. These figures give the central bank more room to prioritize growth over fighting inflation, reinforcing the case for lower rates.

We should also be positioning for further Sterling weakness ahead of the Autumn Budget later this month. Expected tax hikes from Chancellor Rachel Reeves will likely act as a drag on consumer spending and business investment. This fiscal tightening runs contrary to what the economy needs, adding another layer of bearish sentiment on the pound.

The case for shorting GBP is strengthened when we look at the United States, where the economic picture is more robust. The most recent US Non-Farm Payrolls report, released just last week for October 2025, showed a solid addition of 195,000 jobs, keeping the Federal Reserve on a more cautious path. This policy divergence between a dovish BoE and a steady Fed makes shorting the GBP/USD pair particularly attractive.

For derivative traders, this suggests buying put options on GBP/USD or establishing bearish futures positions. The pair is already trading below its 200-day moving average, and with the RSI showing bearish momentum, the technicals align with the fundamental view. We are looking at the April 2025 low near 1.2700 as a logical first target for these positions.

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