Insights 
VT 
Pound Sterling rebounded against the US Dollar on Monday, reaching near 1.3350 as the US Dollar weakened amid speculation of a Fed interest rate cut. The US Dollar Index fell by 0.1% to around 98.80, with traders anticipating a 25-basis-point rate cut. US Consumer Price Index indicated moderate inflation, providing room for the Fed to focus on job demand improvement.
Global Influences on Currencies
Globally, US-China trade deal prospects are supporting the US Dollar, with positive signals from US officials and President Trump. Meanwhile, Pound Sterling’s technical analysis shows it facing resistance near the 200-day EMA around 1.3300, with support at 1.3140 and resistance at 1.3500.
Given the current situation on October 27, 2025, the focus for the next few days is firmly on the Federal Reserve’s decision this Wednesday. With the market having almost fully priced in a 25 basis point rate cut, the actual cut itself will not cause much movement. We should instead pay close attention to the Fed’s forward guidance, as any hint that this is the last cut for a while could cause a sharp reversal and strengthen the US Dollar.
The recent strength in the Pound Sterling, driven by positive retail sales and PMI data, appears fragile and could present a selling opportunity. We must remember that the broader economic picture for the UK remains weak, highlighted by the recent unemployment rate rising to 4.8%, a high we haven’t seen since mid-2021. This underlying weakness suggests the Bank of England will remain dovish, limiting any long-term upside for the pound.
Options Strategies in Volatile Markets
With major event risks from both the Fed and ongoing US-China trade talks, implied volatility is likely to increase. This sets up a good environment for options strategies that profit from large price swings, regardless of direction. We could consider using a long straddle on the GBP/USD pair, which involves buying both a call and a put option, to capitalize on a potential breakout.
The possibility of a US-China trade deal is a major variable that could disrupt current trends. We have seen in the past, particularly during the 2018-2020 period, how positive headlines from President Trump on trade can cause sudden, risk-on rallies that benefit the US Dollar. Any concrete news of a deal with China later this week could easily overshadow the Fed’s rate cut and send the GBP/USD pair lower.
Considering the technical levels, the pair is hovering around the critical 200-day moving average near 1.3300. A break below this level could open the door for a move towards the August low of 1.3140, a target for those positioning for GBP weakness with put options. Conversely, if the pound continues to rally, the psychological barrier at 1.3500 will be the key level to watch for signs of exhaustion.
