Insights 
VT 
GBP/USD has risen to near 1.3250 as the US Dollar weakens, with increasing anticipation of a Federal Reserve rate cut in December. Markets are pricing in an 87% chance of a 25 basis points rate cut next month, a sharp increase from 39% the previous week, and expect three further cuts by 2026.
The prospect of Kevin Hassett as the next Fed chair bolsters these expectations due to his alignment with preferences for lower rates. The British Pound has strengthened on the back of UK Chancellor Rachel Reeves’ budget, marked by a commitment to fiscal discipline but tempered by the Office for Budget Responsibility’s forecasts.
Pound Sterling Trends
The GBP/USD pair maintains upward momentum for a seventh consecutive session, trading around 1.3240. Early economic forecasts have affected market sentiment, projecting weaker growth but showing a larger fiscal buffer, stabilising the Pound.
The Pound Sterling, the world’s oldest currency, remains one of the most traded globally. Its value is influenced primarily by the Bank of England’s monetary policy, which targets price stability via interest rates. Economic data related to GDP and trade balances also affect Sterling, indicating health and potential for interest rates.
The US Dollar is weakening as we see overwhelming expectations for a Federal Reserve rate cut in December. Markets are pricing in an over 87% probability of a cut, a view that was strengthened after US core inflation for October 2025 came in slightly below forecast at 2.8%. This gives the Fed a clear runway to begin easing its monetary policy.
In contrast, the Pound Sterling is finding its own strength, partly due to the UK’s different economic picture. The latest UK inflation data from October was still stubborn at 3.1%, meaning the Bank of England is unlikely to follow the Fed’s lead and cut rates soon. This growing policy divergence between the two central banks is a fundamental reason for the Pound’s outperformance against the Dollar.
Currency Pair Strategies
This environment reinforces the winning streak we’ve seen in GBP/USD, which has now risen for seven consecutive sessions. Looking back at the Fed’s easing cycle in 2019, we recall a similar period of sustained Dollar weakness that benefited pairs like Cable. The talk of Kevin Hassett possibly leading the Fed further supports a long-term dovish outlook for US rates.
For the coming weeks, we should consider positioning for more GBP/USD gains ahead of the critical December Fed meeting. Buying call options with a strike price near 1.3300 offers a direct way to capitalize on this upward momentum. Implied volatility for options expiring next month has already risen to a three-month high of 9.5%, showing that the market is braced for a significant move.
For those looking to manage costs amid this higher volatility, a bull call spread could be a more prudent strategy. We are watching the 1.3250 level as a key support for the current rally. Chancellor Reeves’ commitment to fiscal discipline provides a stable backdrop for the Pound, so long as economic growth doesn’t falter more than the OBR projects.
