Insights 
VT 
Key Economic Data Releases
Key US economic data, the Consumer Price Index (CPI), is set for release at 12:30 GMT on Friday. Predictions suggest core CPI inflation will hold at 3.1% year-on-year for September. This data will be one of the final inflation metrics before the Federal Reserve’s meeting on October 29, when a quarter-point interest rate cut is highly anticipated.
We are seeing GBP/USD under significant pressure, testing the 1.2200 level as downward momentum builds. This weakness is largely fueled by a stronger dollar, especially after the latest US jobs report for September 2025 showed a resilient labor market, adding 210,000 jobs. Derivative traders should note the pair’s failure to hold above its 50-day moving average, signaling potential for further weakness.
Adding to the pound’s troubles is the upcoming UK growth data, with early forecasts suggesting a potential economic contraction for the third quarter. We recall the sharp market volatility following the fiscal uncertainty back in late 2022, so any weak data could easily spook traders. Options market data shows an increase in demand for downside protection on the pound, with put option volume rising over the past week.
Market Positioning And Strategy
The main event traders are watching is next week’s release of the US Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge. Market consensus expects a core reading of 2.8% year-over-year, a figure that would likely reinforce the Fed’s messaging to keep interest rates higher for longer. This contrasts with market sentiment from just a year ago in 2024, when rate cuts were still being actively priced in for this period.
Given this backdrop, we are positioning for continued divergence between the US and UK economies. Traders could consider buying put options on GBP/USD to hedge against a break below the 1.2200 support level, particularly ahead of the US PCE data. Structuring bearish risk reversals could also be a cost-effective way to express a negative view on the pair in the coming weeks.
