Insights 
VT 
The Pound Sterling has declined to near 1.3430 against the US Dollar, as the Greenback’s demand increases. This comes as several Federal Reserve (Fed) officials are poised to speak, with expectations of two more interest rate cuts this year. Traders currently see an 81.5% chance of such reductions, based on the CME FedWatch tool. The US Dollar Index rises by 0.25% to near 98.35 amid political uncertainty in Japan and France.
The Pound Sterling decreased by 0.3% against the US Dollar during the European session on Tuesday. Amid growing UK labour market concerns, the Bank of England (BoE) may cut interest rates again, and BoE Pill’s upcoming speech is awaited for clearer guidance on future policy.
Technical Analysis Overview
Technical analysis indicates the Pound Sterling remains under pressure near the 20-day Exponential Moving Average (EMA). With the GBP/USD pair positioned near 1.3440, key support lies at the August low of 1.3140, while resistance is at the September high of 1.3726. Investors wait for speeches from several Fed officials to gauge the US labour market’s condition, given the lack of recent economic data due to the US government shutdown.
Given the current safe-haven demand for the US Dollar, we are seeing the Pound Sterling weaken despite strong expectations of Federal Reserve rate cuts. This suggests that geopolitical concerns, specifically the political uncertainty in France and Japan, are overriding monetary policy forecasts for now. Derivative traders should be cautious, as this “risk-off” sentiment can be unpredictable and is currently the primary driver of price action.
The case for a weaker dollar fundamentally remains strong, as we anticipate two more interest rate cuts from the Fed before the end of the year. Recent data supports this, with the September 2025 US Consumer Price Index (CPI) report showing inflation cooling to 2.8%, giving the Fed more room to ease policy. This backdrop suggests the dollar’s current strength might be temporary, creating a complex trading environment.
UK Economic Pressure
On the UK side, concerns about the domestic economy are adding pressure to the pound. The latest figures from the Office for National Statistics showed the UK unemployment rate edged up to 4.5% last month, reinforcing the view that the Bank of England may need to cut rates again soon. Huw Pill’s upcoming speech will be critical, as any dovish language could accelerate Sterling’s decline.
This divergence between short-term sentiment and long-term monetary policy is causing a noticeable increase in implied volatility in the GBP/USD options market. We have seen 1-month implied volatility climb to 9.2%, up from 7.5% just a few weeks ago in September 2025. This indicates the market is bracing for larger price swings in the near future.
In response, traders could consider buying put options on GBP/USD to hedge against or speculate on further downside toward the 1.3140 support level. A put option with a strike price of 1.3350 expiring in late November provides a defined-risk way to profit if the current downward momentum continues. This strategy protects capital while capturing the benefit of falling prices and rising volatility.
Alternatively, for those believing the dollar’s strength is overdone, selling cash-secured puts with a strike well below the current price, perhaps near the 1.3200 level, could be a viable strategy. This approach allows traders to collect premium by taking the view that the August 2025 low will hold as a significant floor. It is a bet that fundamental drivers, like the Fed’s easing cycle, will eventually reassert control over the currency pair.
