Insights 
VT 
The EMA Battle
GBP/USD experienced a decline, falling below 1.3400, marking a three-day downward trend. Traders await key UK CPI inflation data, expected to rise to 4.0% YoY, with core CPI likely increasing to 3.7%.
The Bank of England’s ability to manoeuvre is limited due to rising inflation, while upcoming US CPI data anticipates an increase to 3.1%. The Federal Reserve aims for further interest rate cuts amid differing inflation challenges between the UK and US.
GBP/USD is in a consolidation phase, trading around 1.3360. The pair is caught between the 50-day EMA at 1.3440 and the 200-day EMA at 1.3290, indicating trader indecision.
The RSI near 44 suggests slight bearish momentum, not yet oversold, with minor selling advantage. Price action respects the 200-day EMA as support, while the 50-day EMA acts as resistance, maintaining the current range.
Potential Breakout Scenarios
Should GBP/USD move decisively above 1.3450 or below 1.3290, it may break free from the range. Falling below the 200-day EMA could lead to further declines, while surpassing the 50-day EMA could provoke gains.
Pound Sterling, the UK’s currency, is impacted by the Bank of England’s monetary policies, economic data, and trade balance, all influencing its value and attractiveness globally.
We are seeing GBP/USD weaken below the 1.3400 mark as traders brace for today’s UK inflation data. The core issue is a widening policy gap, with the Bank of England stuck fighting inflation while the US Federal Reserve is expected to continue cutting interest rates. This divergence is the main driver for derivative plays over the next few weeks.
Today’s UK Consumer Price Index (CPI) is forecast to rise to 4.0%, a difficult number for a central bank facing a slowing economy. Recent figures from the Office for National Statistics confirmed the UK entered a technical recession in the third quarter of 2025 with a -0.2% GDP reading. This situation severely limits the Bank of England’s ability to raise rates, putting a ceiling on the pound’s potential.
In contrast, the US CPI due this Friday is expected at a more moderate 3.1%, giving the Fed more flexibility. In fact, the CME FedWatch Tool now shows an 85% probability of another 25-basis-point rate cut at the November 2025 meeting. This outlook continues to weigh on the US dollar’s long-term strength.
The upcoming data releases guarantee a spike in volatility, which options traders can use to their advantage. A simple strategy is to buy near-term at-the-money straddles to capitalize on a significant price swing, whether it is up or down. This approach allows a trader to profit from the movement itself without needing to predict the direction correctly.
For those anticipating further sterling weakness, the critical level to watch is the 200-day moving average near 1.3290. We saw this level provide strong support back in the summer of 2024, but a break below it now could open the door to a slide towards 1.3140. Buying put options with a strike price of 1.3250 offers a defined-risk way to position for such a downward move.
On the other hand, a surprisingly high UK inflation figure could force the Bank of England to sound more aggressive, pushing the pound higher. A sustained move above the 50-day moving average at 1.3440 would be a bullish signal. Traders anticipating this outcome could use call options with a strike price around 1.3500 to capture potential upside.
