Insights 
VT 
The Pound Sterling (GBP) has risen by 0.2% against the US Dollar (USD), positioning it as a mid-performer among the G10 currencies. This gain results from a weaker USD rather than improvements within the UK’s domestic conditions.
Market Fundamentals For The Pound
Market fundamentals show deterioration with a pullback in UK-US spreads, which had previously reached two-year highs. This change comes as investors readjust their expectations, pricing in a more dovish Bank of England following disappointing UK labour market data.
Governor Bailey acknowledged the softness in the UK labour market while weighing it against above-target inflation. Markets anticipate nearly one full 25 basis point cut by February, increasing the expectation by nearly 10 basis points over the past week.
Relative Strength Index (RSI) is moving up from bearish levels towards the neutral 50 threshold. The GBPUSD observed support in the mid-1.32s, with potential resistance near 1.34 and the 50-day moving average of 1.3476. The short-term outlook suggests a range trading between 1.33 and 1.34.
The date is October 15, 2025. The British Pound is seeing a small lift against the dollar, but we believe this is misleading strength. This move is more about recent US dollar weakness, following soft retail sales data, than any positive news from the UK economy.
UK Economic Challenges
UK fundamentals are worsening, highlighted by yesterday’s disappointing jobs report which showed unemployment ticking up to 4.5%. This has caused us to re-evaluate the Bank of England’s path, with markets now pricing in a full 0.25% interest rate cut by February 2026. Governor Bailey is clearly concerned about the labor market, even with inflation still running at 3.1%, well above the 2% target.
Given this dovish shift from the central bank, we see opportunities in positioning for further pound weakness. For GBP/USD, selling rallies toward the 1.34 handle or using put options to bet on a break below 1.33 seems like a sound strategy for the coming weeks. Resistance near the 50-day moving average of 1.3476 appears strong.
This UK-specific weakness is happening against a backdrop of global economic uncertainty, as noted by the IMF’s recent report. This suggests that volatility in major indices may rise, making options strategies that benefit from price swings, such as long straddles on the FTSE 100, potentially profitable. The overall pace of global expansion remains slow, which may pressure riskier assets.
The current dilemma for the Bank of England, balancing a weak labor market against high inflation, is reminiscent of the challenges faced by central banks back in the 2022-2023 period. Historically, when growth concerns overtake inflation fears, central banks tend to cut rates, which is typically negative for their currency. We are seeing the beginning of this shift in market pricing now.
