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The GBP/USD pair fell to 1.3149, nearing a seven-month low, due to the government’s decision to drop income tax rate increases. The British government, led by Keir Starmer and Rachel Reeves, opted for indirect measures to manage a £30 billion budget deficit.
In financial forecasts, GBP/USD was predicted to drop to 1.3050-1.3139, a target reached when it fell to 1.3010. Analysts suggest if a significant low is in place, the GBP/USD may experience a large rally.
Wave Pattern Analysis
The GBP/USD has shown a wave ((x)) high on September 17 at 1.3726. Subsequent declines fit the pattern of wave ((y)), labelled as (a)-(b)-(c).
Other market activities include the DOW JONES recovering after AI stock fluctuations and the gold market experiencing a dip below $4,100. Meanwhile, the USD/JPY is moving towards nine-month highs due to the stable US Dollar.
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As of November 14, 2025, the pound is struggling near a seven-month low against the dollar, trading around 1.3149. This weakness is linked to the government cancelling planned tax hikes, creating uncertainty ahead of the Autumn Statement on November 26. The move has traders concerned about how the UK will manage its estimated £30 billion budget deficit.
However, we believe the corrective decline that began back in July may have finally ended with the low of 1.3010 seen on November 5. From a technical standpoint, this completes a specific wave pattern, suggesting the foundation for a significant rally is now in place. This indicates the recent sell-off could be a bottoming process rather than the start of a new downtrend.
Derivative Trading Strategy
Derivative traders should consider positioning for a potential sharp rebound in GBP/USD in the coming weeks. Buying call options could be an effective strategy to gain exposure to this expected rally while limiting downside risk. The key is to capitalize on the view that the pound has been oversold on short-term political news.
This bullish outlook is supported by recent economic data that may force the Bank of England’s hand. The latest Office for National Statistics release showed UK core inflation for October ticked up unexpectedly to 2.9%, resisting a faster decline toward the 2% target. This persistent inflation reduces the likelihood of the BoE signaling rate cuts anytime soon, which is supportive for the pound.
We have seen similar patterns before, particularly after the sharp market turmoil following the “mini-budget” back in the autumn of 2022. After an initial, dramatic sell-off driven by fiscal policy fears, the pound staged a multi-month recovery once a clearer policy path was established. The current situation could follow a similar path, where the initial shock gives way to a sustained recovery.
Therefore, we see the recent low of 1.3010 as a critical support level. As long as the price remains above this point, the constructive outlook for a major rally holds. A break below this level would signal that the corrective period is not over and would require a reassessment of any bullish positions.
