Insights 
VT 
The GBP/USD has fallen below 1.3300 for the first time since mid-October, primarily due to a pessimistic productivity outlook from the UK’s OBR. The planned productivity forecast reduction could lead to a £20 billion deficit in UK public finances, presenting challenges for the upcoming budget.
The currency pair declined by over 0.50%, trading at 1.3280 after a low of 1.3247. The Fed–BoE divergence may cushion further losses as a 25 basis point cut by the Federal Reserve is expected, while the Bank of England plans to maintain rates.
Economic Impact on Currency
Economic data releases such as GDP and employment figures significantly impact the Pound’s value, with stronger data generally boosting Sterling. A positive Trade Balance also benefits the currency by increasing demand from foreign buyers.
The GBP/USD is nearing the 200-day Simple Moving Average, suggesting potential movement towards 1.3200 if breached. If it rises past 1.3300, buyers would aim for levels above 1.3400, indicating a potential uptrend.
With the Office for Budget Responsibility’s warning of a £20 billion fiscal hole weighing on sentiment, we are seeing sustained pressure on the pound. The break below the 1.3300 level is significant, suggesting that traders should consider strategies that profit from further declines in the coming weeks. This might involve buying put options with strike prices at or below the 1.3200 psychological level.
This negative outlook is reinforced by the latest data from the Office for National Statistics, which showed UK public sector net borrowing in September 2025 was £2.5 billion higher than forecast. This makes the upcoming Autumn Budget a critical risk event, as any signs of further fiscal strain could accelerate the pound’s slide. We saw UK labour productivity figures for the third quarter show growth of only 0.1%, giving credibility to the OBR’s pessimistic view.
Historical Context and Market Sensitivity
We only have to look back to the market turmoil in the autumn of 2022 to see how sensitive the pound is to concerns over the UK’s public finances. During that period, fiscal uncertainty sent the pound tumbling to historic lows near 1.0300 against the dollar. While the current situation is not as severe, it reminds us how quickly sentiment can turn against sterling when fiscal credibility is questioned.
Even though the Federal Reserve is expected to cut interest rates this week, this move appears to be largely priced in by the market. The new, more powerful driver for the GBP/USD pair is the specific domestic issue of the UK’s weakening fiscal and productivity outlook. This divergence in focus means the Fed’s cut may not provide the floor for the pound that some might expect.
From a technical standpoint, the key level to watch is the 200-day Simple Moving Average, currently around 1.3233. A decisive break and hold below this level would likely open the door for a swift move toward 1.3200 and potentially lower. Any rallies back toward 1.3300 could be seen as opportunities to initiate new bearish positions.
