Insights 
VT 
GBP/USD decreased around 1.3120 during Asian hours on Friday after a 1% rise over the prior sessions. This decline followed the Bank of England’s decision to maintain interest rates at 4% in November, which showed a dovish trend as four of the nine Monetary Policy Committee members suggested cutting rates to 3.75%.
The pair had risen on Thursday due to bearish price action and a close vote on interest rate changes by the Bank of England, which stirred hopes of economic support despite ongoing high inflation. The Monetary Policy Committee’s decision to hold interest rates surprised no one, but the tight five-to-four vote margin did catch attention.
Focus on BoE’s December Meeting
As of Friday, GBP/USD is off its daily highs, trading at 1.3080, a 0.26% increase. The focus now is on the BoE’s December meeting, given the current 5-4 vote split on maintaining the Bank Rate. Governor Andrew Bailey noted the September inflation figure held steady but stated more data is essential to confirm inflation trends.
Bailey emphasised uncertainty about neutral rates, acknowledging current policies remain restrictive. He mentioned the need to ensure inflation is heading towards the 2% target before considering further rate cuts.
The Bank of England’s close 5-4 vote to hold rates is the most important signal for us right now. This dovish tilt suggests that the central bank is preparing to cut interest rates, possibly as soon as its December meeting. This outlook puts downward pressure on the Pound Sterling against the US Dollar.
Given this, we believe traders should consider strategies that benefit from a falling GBP/USD. This could involve buying put options that expire after the next rate decision to position for a potential decline. Selling out-of-the-money call spreads is another approach, aiming to profit if the currency pair fails to rally significantly from current levels.
Revisiting Inflation Trends
This situation is reminiscent of what we observed back in 2024, when inflation began its steady retreat. We saw the annual UK CPI rate fall from 4.0% in January 2024 to just 2.3% by April, which paved the way for the BoE to begin cutting rates later that summer. It appears we are now at the start of a similar cycle, where weakening inflation precedes monetary easing.
All eyes will now be on the next UK inflation and GDP reports ahead of the December meeting. The latest data from the Office for National Statistics showed the UK economy grew by a mere 0.1% in the third quarter of 2025, underscoring the weakness that is clearly concerning some MPC members. Any further deterioration in economic data will almost certainly lock in a rate cut and could accelerate the Pound’s depreciation.
