Insights 
VT 
The Pound Sterling (GBP) is up by 0.3% against the US Dollar (USD) and is leading among all G10 currencies. This increase is due to stronger than expected domestic data, particularly trade and industrial production reports from August.
This data provides a positive balance against earlier disappointing employment figures. Market sentiment is a major influence on GBP, with a focus on upcoming fiscal developments and the November 26 budget release.
Technical Indicators
Technical indicators show the RSI at 50, and the GBP is nearing a break of the 50-day moving average at 1.3476. There is limited resistance before reaching 1.35, suggesting a potential short-term range between 1.3380 and 1.3480.
With the British Pound showing strength, we see the current 1.3380 to 1.3480 range as a place for short-term plays. The recent upside surprises in August’s trade and production data give the currency a solid footing. This positive data provides a welcome contrast to the weaker employment figures we saw earlier in the week.
This fundamental strength is supported by recent inflation numbers that are keeping the Bank of England on alert. The September CPI data released last week showed inflation holding at 2.3%, slightly above the Bank’s target. This makes it unlikely the central bank will consider cutting rates anytime soon, which provides a floor for the Pound.
For derivative traders, this suggests that selling out-of-the-money puts below the 1.3380 support level could be a viable strategy to collect premium. Given that the RSI is neutral at 50, a major breakout seems unlikely before more news develops. We are also seeing implied volatility tick lower, making options relatively cheap for now.
Market Sentiment and Upcoming Events
The main event on our horizon is the November 26 budget announcement, which is driving overall market sentiment. After the fiscal instability we witnessed in previous years, traders are looking for reassurance and will react strongly to any surprises. This makes buying straddles a sensible play as we get closer to November, positioning for a big move in either direction.
On the other side of the pair, recent data from the United States shows core inflation is continuing its slow decline, with the latest figures at 2.5%. This reduces pressure on the US Federal Reserve to be overly aggressive with its policy. This divergence between a steady Bank of England and a more patient Fed is helping to push GBP/USD towards the 1.35 resistance level.
