Insights 
VT 
The Pound Sterling (GBP) recovers to near 1.3370 against the US Dollar (USD) during the European trading session. This follows a correction in the US Dollar after Federal Reserve members, including Jerome Powell, expressed concerns about the labour market.
Analysts at UOB Group suggest that GBP/USD is likely to trade within a range of 1.3290 to 1.3365. Despite slowed downward momentum, there remains a possibility for GBP to decline further to 1.3200.
UK Data and Bank of England Stance
UK data have provided varied signals, with the Bank of England’s stance remaining uncertain. The Pound’s underperformance affected its position against core G10 currencies, while EUR/GBP experienced its largest gain since 16th September. The probability of a rate cut by the Bank of England increased from 20% to 40% over the last three days, as the 2-year Gilt yield dropped by 5 basis points.
From our perspective on October 15, 2025, the Pound is caught between a weaker US Dollar and growing concerns about the UK economy. The US Dollar’s recent slide follows Federal Reserve comments on the labor market, giving GBP/USD a temporary lift. This creates a conflicted environment where neither currency has a clear advantage.
We see the pair likely trading within a narrow channel between 1.3290 and 1.3365 in the coming weeks. The recent US Non-Farm Payrolls report from early October, which showed a disappointing gain of only 155,000 jobs against an expected 200,000, supports the view of a less aggressive Federal Reserve. This should provide a floor for GBP/USD near the low 1.33s for now.
Sterling’s Limited Upside
However, the upside for Sterling appears limited due to mounting speculation of a Bank of England rate cut before the end of the year. Last week’s UK inflation data, which saw CPI unexpectedly fall to 2.2%, coupled with stalling Q3 GDP growth, has doubled the market-implied probability of a rate cut to 40%. This suggests that rallies toward the 1.3370 level will likely face selling pressure.
For derivative traders, this outlook supports strategies that profit from low volatility, such as selling strangles with strikes set outside the expected 1.3290-1.3365 range. Given the underlying risk of a sharper GBP decline, a slight bearish bias could be prudent, perhaps by buying cheaper, out-of-the-money puts below 1.3200 as a hedge. The current low implied volatility makes these options relatively inexpensive.
This situation feels similar to the choppy market conditions we experienced in the second half of 2024 when central bank policies were also diverging. During that period, range-trading strategies performed well until a clear trend emerged. We should therefore remain cautious of any breakout, but for now, the path of least resistance appears to be sideways.
