Insights 
VT 
GBP USD Decline
GBP/USD experienced a decline of over 0.35% on Wednesday, falling below the 1.3250 level. This drop comes amid increased expectations of a Bank of England rate cut in November and anticipation for the Federal Reserve’s monetary policy decision.
The Pound Sterling hit an almost three-month low around 1.3200 against the US Dollar during Wednesday’s European session. This slump corresponds with a 0.2% rise in the US Dollar Index, which approached 99.00 ahead of the Fed’s policy announcement.
For the second consecutive session, GBP/USD traded near 1.3250 during Wednesday’s Asian hours. The decline was influenced by Pound Sterling weakness following British Retail Consortium data showing UK food prices falling rapidly, nearly a five-year record, suggesting potential Bank of England rate cuts.
We are seeing downward pressure on GBP/USD, which is reminiscent of past periods driven by central bank policy divergence. The current market is focused on when the Bank of England (BoE) will begin its cutting cycle, just as we saw back when the pair fell below its 200-day moving average. Today, with the pair trading around 1.2450, the focus is squarely on the upcoming BoE meeting next week.
The situation feels similar to late 2023 when expectations for a BoE rate cut sent the pound tumbling toward 1.3200 against a strong dollar. Now, recent data shows UK inflation cooling slightly faster than expected, with the September 2025 CPI print coming in at 3.1%. This has led money markets to price in a 60% probability of a rate cut by the second quarter of 2026, putting a ceiling on Sterling’s strength.
US Federal Reserve’s Impact
On the other side of the pair, the US Federal Reserve appears to be in a holding pattern, but recent economic signals are creating uncertainty. The last Non-Farm Payrolls report for September 2025 came in slightly below expectations at 165,000 jobs, hinting at a softening labor market. This has traders questioning whether the Fed will be forced to pivot to a more dovish stance sooner than anticipated, creating a tug-of-war in the currency pair.
Given this dynamic, options traders should consider strategies that account for potential volatility around the upcoming central bank announcements. The implied volatility for one-month GBP/USD options has ticked up to 8.5%, suggesting the market is bracing for a move. A break of the key 1.2400 support level could trigger a rapid decline, similar to the technical breakdown we witnessed years ago.
Therefore, we see traders positioning for this uncertainty by buying downside protection through put options with strikes around 1.2350. This reflects the historical precedent where sentiment shifted against the pound quickly once a key technical level gave way. According to the latest CFTC data, speculative net-long positions in GBP have been unwound for the third consecutive week, showing that larger players are already reducing their exposure.
