Insights 
VT 
The Pound Sterling remains stable around 1.3230 against the US Dollar during the European trading session on Monday. This stabilisation comes as the US Dollar declines amidst strong expectations that the Federal Reserve will lower interest rates in its upcoming monetary policy meeting.
The US Dollar Index, which tracks the Greenback against six major currencies, reaches a new two-week low near 99.30. The GBP/USD pair softens below 1.3225, influenced by rising predictions of a Federal Reserve rate cut. Traders assign an 87% likelihood of a 25 basis point cut next week, according to the CME FedWatch tool.
UK Autumn Budget
Last week, UK Chancellor Rachel Reeves unveiled the Autumn Budget, featuring adjustments to taxes, business rates, benefits, and pensions. The budget offers increased fiscal clarity, potentially sparking a modest relief rally for the Pound Sterling against the US Dollar.
We are seeing GBP/USD consolidate around 1.3230 as markets await key economic data and next week’s Federal Reserve meeting. The high probability of a US rate cut, now priced at over 85%, is putting significant pressure on the US Dollar. This creates an environment where short-term options could be used to trade the expected volatility around the Fed’s announcement.
The case for a Fed cut is reinforced by recent economic figures we have seen over the past month. The last Consumer Price Index report for October 2025 showed inflation cooling to 2.8%, and the jobs report before that indicated a slowing labor market. Traders should now watch today’s US ISM Manufacturing PMI, as a reading below the 50 mark would solidify expectations for easier monetary policy.
UK Economic Struggles
On the Sterling side of the pair, the UK economy is struggling with sluggish growth, as confirmed by the last GDP report showing only 0.1% expansion. While last week’s Autumn Budget provided some fiscal clarity, it does little to change the fact that UK inflation remains stubbornly above target at 3.5%. This backdrop suggests the Bank of England is unlikely to offer any support for the pound, capping the upside for the currency pair.
We should remember that the current trading level above 1.32 is historically strong for the pound, especially when looking back at the lows of 2022 and 2023. Given the bearish technical setup with the price below the 100-day moving average, a surprise from the Fed could trigger a sharp sell-off. Buying protective put options with a strike price near 1.3100 could be a sensible hedge against any unexpected hawkishness from US policymakers.
