The market no longer anticipates a rate cut by the Bank of England (BoE) in its November meeting. Current market implied policy rates indicate a 2 basis points ease on a 1-month view and 12 basis points in 3 months.

The BoE’s decision-making in 2025 will likely be impacted by the UK’s November 26 budget, which could influence the UK’s growth and inflation outlook. The pound has shown stable performance relative to its G10 counterparts recently. Although it has declined against the USD and the EUR, the EUR/GBP pair is expected to rise slowly into next year, with potential dips in the USD back to the 1.32 area on a 3-month view.

Global Economic Outlook

Global economic stability remains uncertain, as highlighted in the International Monetary Fund’s October 2025 World Economic Outlook. The report noted a slight upward revision in global growth forecasts, but overall expansion remains muted. The report offers insights into the best brokers in 2025, considering different trading requirements and regional advantages. These include brokers with low spreads, high leverage, and those best suited for specific markets like EUR/USD and Gold.

The market has correctly priced out a Bank of England rate cut for the upcoming November 6 meeting, a sentiment that has been building since August. We see this reflected in the latest inflation data from September, which showed headline CPI at 2.4%, stubbornly above the BoE’s target. Therefore, derivative traders should consider unwinding any remaining dovish bets for the fourth quarter of 2025.

We remember that the BoE’s rate cut in early August was accompanied by surprisingly cautious comments from Governor Bailey about the labour market. The latest data supports his hesitance, with the unemployment rate holding firm at 4.1% and average weekly earnings still growing at a robust 5.5% annually. These figures suggest that underlying price pressures are not fading as quickly as hoped, making further cuts this year unlikely.

Impact of the UK Budget

All eyes are now shifting towards the UK’s budget announcement on November 26, which will be a more significant driver for policy in 2026 than the BoE’s immediate messaging. This budget is expected to outline new fiscal parameters that will directly impact the outlook for UK growth and inflation. We anticipate that options strategies that benefit from increased volatility around this date could be prudent.

In the currency markets, the US dollar’s strength is likely to persist for the next few months, fueled by a strong US jobs report for September which showed non-farm payrolls adding 210,000 jobs, beating expectations. This reinforces the view that the Federal Reserve will hold rates steady, creating a challenging environment for the pound. We see potential for GBP/USD to drift down towards the 1.32 level before year-end.

Against the euro, we expect the pound to continue its slow decline, with EUR/GBP grinding higher into the new year. While UK inflation remains a domestic issue, recent sentiment surveys like the German ZEW Economic Sentiment index have shown cautious improvement in the Eurozone outlook. This slight divergence favours positioning for a stronger euro relative to the pound in the coming weeks.

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