Insights 
VT 
The GBP/USD pair has decreased to 1.3220 due to reduced liquidity and profit-taking after the Autumn Budget, alongside increased expectations of a Fed rate cut. The chances of a 25-basis-point rate cut at the Fed’s December meeting have risen to 87%. Meanwhile, the UK plans to fund additional welfare spending through a proposed £26 billion tax increase.
Despite nearly 1% weekly gains, GBP/USD faced selling pressure after peaking at 1.3268. The pair is now predicted to fall below 1.3200, with market participants anticipating a 25-bps cut by the Bank of England, which could further impact the pair.
Technical Analysis
Technical analysis indicates a potential decline in GBP/USD as an ‘evening star’ pattern emerges. A close below 1.3200 might lead to further losses, with the 20-day SMA at 1.3139 serving as key support levels. The RSI appears to be turning bearish, suggesting growing momentum for sellers.
In currency movements this month, the British Pound has been strongest against the Japanese Yen. GBP saw a 1.39% increase against the USD, with variation in performance against other major currencies like EUR and CAD. The heatmap illustrates percentage changes among major currencies, detailing interactions between base and quote currencies.
We’re seeing bearish sentiment build against the Pound, driven by the new budget and diverging central bank expectations. The technical signals, like the evening-star pattern, suggest the recent peak around 1.3268 might not be revisited soon. This environment favors strategies that profit from a fall in the GBP/USD exchange rate.
The government’s plan to raise taxes by £26 billion is creating headwinds, as money markets are now pricing in a Bank of England rate cut. With UK inflation having recently eased to 3.8% in October 2025, down from over 4.5% earlier in the year, the BoE has more room to consider easing policy. This fundamental backdrop supports a weaker Sterling in the near term.
Market Sentiment
On the other side of the pair, bets for a Federal Reserve rate cut have soared to 87% following dovish remarks from officials. However, the US economic picture remains more resilient, with initial jobless claims holding at a low 216,000 and core inflation at 3.2%. For now, the market appears more focused on the Pound’s specific vulnerabilities than potential dollar weakness.
For derivative traders, this outlook suggests positioning for a drop below the 1.3200 level. Buying GBP/USD put options with strike prices around 1.3150 or 1.3100 could be a viable strategy to capitalize on the expected move. The 20-day simple moving average at 1.3139 serves as the first major target for any bearish plays.
While the primary view is bearish, we must acknowledge the Pound’s recent strength against currencies like the Japanese Yen, which saw a 1.98% move this past month. Traders should use the resistance at the 50-day moving average near 1.3280 as a key level for stop-losses on short positions. Any unexpected hawkish signals from the Bank of England could quickly unwind this bearish setup.
