The Pound Sterling is experiencing pressure amid uncertainties linked to the Bank of England’s policy decision. This cautious trading follows slower UK job growth and expectations of a possible interest rate reduction by the Bank of England. Market speculations, driven by recent employment and inflation data, see a one in three likelihood of a 25 basis points interest rate cut.

In contrast, the US Dollar is showing robustness owing to dwindling odds of the Federal Reserve reducing interest rates. The Pound trades around 1.3140 against the US Dollar, influenced by the receding dovish bets on the Fed for December. The Fed’s potential stance on maintaining current interest rates is critical for future economic activity, with the US ISM Manufacturing PMI projecting a reading of 49.2 for October.

Technical Analysis

Technical analysis indicates the Pound Sterling remains bearish, trading below the 200-day Exponential Moving Average. Key levels to watch include support near 1.3100 and resistance at 1.3370. Meanwhile, the ISM Manufacturing PMI, indicating US manufacturing sector health, remains significant for traders, with expectations slightly above September’s figure. A reading below 50 would suggest contraction, affecting the US Dollar’s strength.

The Pound is weak and the US Dollar is strong, creating a clear trend for us to watch. The main event this week is the Bank of England’s interest rate decision on Thursday, with a growing chance they might cut rates. This uncertainty puts downward pressure on the GBP/USD pair, which is already trading near a six-month low.

We see the potential for a BoE rate cut driven by real economic data. The Office for National Statistics reported last month that UK unemployment for the three months ending in August 2025 had ticked up to 4.5%. This, combined with the September Consumer Price Index falling to 3.8%, gives the BoE justification to consider easing its policy to support the slowing economy.

In contrast, the US economy appears more robust, giving the Federal Reserve less reason to cut rates. The latest US Non-Farm Payrolls report, released just last Friday, showed a healthy addition of 215,000 jobs, beating expectations and signaling a tight labor market. Furthermore, with US inflation from September still holding stubbornly at 3.9%, well above the Fed’s 2% target, hawkish sentiment is likely to continue.

Strategic Considerations for Traders

Given the high uncertainty around the BoE announcement, we should consider strategies that profit from a large price move in either direction. Buying option straddles or strangles on GBP/USD could be an effective way to play the expected spike in volatility. This allows us to benefit from a significant move without needing to predict whether the BoE will cut rates or hold them steady.

For those with a bearish view, the technical picture supports shorting the Pound against the Dollar. Since the GBP/USD pair is trading below its 200-day moving average, a key bearish indicator, we could look at selling futures contracts. The next major support level to watch is the psychological barrier at 1.3000.

Before the BoE meeting, we must pay close attention to the US ISM Manufacturing PMI data being released later today. A figure coming in stronger than the 49.5 consensus would likely boost the US Dollar and push GBP/USD closer to its recent lows. Conversely, a surprisingly weak number could provide a temporary bounce for the struggling Pound.

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