Insights 
VT 
The Pound Sterling (GBP) is underperforming, falling 0.1% against the US Dollar (USD). Early gains in the upper 1.33s during Asian trade were not sustained.
There is no notable news affecting the GBP’s decline. EURGBP gains through the late September high around 0.8750 may have pressured the pound, nearing the July high of 0.8770.
Technical Outlook for GBP
GBP’s current performance affects its short-term technical outlook, reinforcing resistance at 1.3370. The low on Friday at 1.3288 is key support, with potential for further losses below this level.
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Investment Strategies Against the Pound
We are seeing the Pound struggle against the Dollar, failing to hold gains above the 1.3370 level. This suggests that buying put options with a strike price below the key 1.3288 support level could be a viable strategy. A decisive break below this point would likely accelerate losses for the GBP/USD pair.
This softness in the Pound is not surprising given the latest economic releases we have seen from the UK. Last week’s data showed that third-quarter GDP growth was a mere 0.1%, feeding speculation that the Bank of England will need to signal a more dovish stance. This is a stark contrast to the economic picture back in 2024, when inflation was the primary concern.
While the Federal Reserve is also expected to lower its rates, the market appears to be pricing in a more significant economic slowdown in the UK. The persistent strength in the EUR/GBP cross, which is now testing its July highs near 0.8770, confirms this is a story of specific Sterling weakness. We can look back at the post-Brexit volatility of the late 2010s to see similar periods where the Pound underperformed its peers.
For the coming weeks, establishing short positions on GBP/USD futures makes sense, especially if that 1.3288 level is breached. Alternatively, purchasing December-expiry put options provides a defined-risk way to capitalize on further downside. Implied volatility for one-month options has ticked up to 9.2% in recent days, reflecting the market’s anticipation of a significant move.
