Insights 
VT 
The GBP/USD exchange rate dropped over 0.50% on Tuesday as the UK faces fiscal challenges, with the Office for Budget Responsibility indicating cuts in productivity. The pair fell below the 1.3300 level for the first time since October.
In addition, the Pound Sterling weakened against major currencies as dovish expectations from the Bank of England countered improved global market sentiment. Meanwhile, the GBP/USD pair later gained strength, reaching near 1.3365, supported by anticipation of a rate cut from the Federal Reserve.
Australian Inflation Data And RBA Meeting
Australia is set to release new inflation data on Wednesday, just before the Reserve Bank of Australia’s policy meeting scheduled for November 3-4. The data from the Australian Bureau of Statistics will include two different inflation measures for the third quarter of 2025.
Global markets started the week stronger following a trade deal framework between the US and China, led by Presidents Donald Trump and Xi Jinping. This development was a positive shift after prolonged tensions and trade threats.
In the cryptocurrency market, Pump.fun (PUMP) continued its recovery, trading above $0.0050. This rise suggests growing optimism and the potential for a rally at the end of the month.
We are seeing significant pressure on the Pound as the Office for Budget Responsibility’s planned productivity cuts point to a large hole in public finances. This news has already pushed the GBP/USD pair below the key 1.3300 level. UK public sector net borrowing is now forecast to be £20 billion higher than previously expected, casting a shadow ahead of the new budget.
Federal Reserve Rate Cut Expectations
However, this Sterling weakness is being countered by growing expectations of a Federal Reserve rate cut tomorrow. After a softer US jobs report earlier this month, the CME FedWatch Tool shows markets are pricing in over a 70% probability of a cut, which is weighing on the US Dollar. This central bank divergence explains why the pair is struggling for a clear direction, currently bouncing around 1.3350.
For derivative traders, this creates an environment ripe for volatility plays on Sterling, as we saw during the fiscal uncertainty back in late 2022. Buying straddles or strangles on GBP/USD could be a prudent way to trade the outcome of the Fed meeting and the lead-up to the UK budget announcement. Volatility options on the pound appear to be a sensible position for the coming weeks.
Looking elsewhere, we see a clear event risk in the Australian Dollar with the quarterly inflation report due tomorrow. The market consensus is for a 1.1% quarterly rise, which would push the annual inflation rate back towards 4.5%. This data will be critical for the Reserve Bank of Australia’s interest rate decision next week.
A higher-than-expected inflation figure could force the RBA into a more hawkish stance, likely sending the AUD/USD pair higher. Traders should be prepared for a sharp move following the release. Positioning with puts or calls offers a defined-risk way to speculate on a surprise from the Australian Bureau of Statistics.
