Insights 
VT 
The GBP/USD pair remains near its lowest level since mid-April, trading below the 1.3100s. The US Dollar remains strong following US Federal Reserve Chair Jerome Powell’s recent comments, reducing the likelihood of a December interest rate cut. This strength supports the dollar despite US government shutdown concerns.
British Pound Under Pressure
The British Pound is under pressure due to UK fiscal concerns ahead of the Autumn budget and potential rate cuts by the Bank of England (BoE). There is rising speculation of a rate cut in early November, with a 68% probability of a cut by year-end. Softer inflation, fiscal challenges, and recent technical indicators, like the breakdown below the 200-day SMA, suggest a downtrend for GBP/USD.
Over the past week, the US Dollar has been strongest against the British Pound. The heat map shows the percentage changes of the US Dollar and other currencies. The US Dollar gained 1.42% against the GBP, 0.94% against the EUR, and 0.80% against the JPY. Other currencies, including the CAD, AUD, NZD, and CHF, reflected smaller or negative changes against USD.
Given the established downtrend in GBP/USD, we should position for continued sterling weakness against the dollar. The fundamental picture supports a stronger greenback, driven by a hawkish Federal Reserve, while the pound faces pressure from domestic economic concerns. This divergence suggests the path of least resistance for the currency pair remains to the downside.
The dollar’s strength is being reinforced by solid economic data, such as last Friday’s report showing the US economy added a robust 210,000 jobs in October 2025. This has led markets to price in only a 15% chance of a Fed rate cut in December, according to the CME FedWatch tool, backing up the firm stance we heard from officials last week. We see this as a clear signal that dollar-buying momentum will persist in the near term.
On the other side of the trade, we are seeing growing bets on a Bank of England rate cut before the year’s end. Recent data from October 2025 showed UK inflation easing to 2.1% and the unemployment rate ticking up to 4.5%, giving the central bank more reason to ease policy. Key events to watch are the BoE’s policy update this Thursday, November 6, and the Autumn Budget on November 26, both of which could add to the pound’s woes.
Strategy for Potential Decline
With this outlook, we believe purchasing GBP/USD put options is a prudent strategy. This allows us to profit from a potential decline in the exchange rate, especially with the BoE’s decision just days away. A dovish tone from the bank on Thursday could act as a powerful catalyst for a move lower.
Historically, we’ve seen implied volatility rise significantly ahead of key central bank meetings and fiscal announcements. Therefore, acquiring options exposure now, before the market fully prices in the event risk of this Thursday’s meeting and the upcoming budget, could prove cost-effective. The pair’s break below its 200-day simple moving average last week further strengthens our bearish conviction from a technical standpoint.
