Insights 
VT 
The pound has decreased against major currencies as the UK’s inflation figures fell below expectations, leading to speculations of a Bank of England (BOE) rate cut. In September, the headline Consumer Price Index (CPI) remained at 3.8% year-on-year, less than the forecasted 4.0%. Core CPI unexpectedly dropped to 3.5% year-on-year, compared to a consensus of 3.7%, with services CPI staying at 4.7% year-on-year.
The BOE’s next policy decision is due on November 6, with market anticipations indicating a 70% chance of a 25 basis points cut to 3.75% by year-end. Over the next year, the market implies 50-75 basis points of easing, with the policy rate potentially reducing to 3.25%-3.50%. This is amidst an expected fiscal drag from the forthcoming UK budget set for November 26, which may allow for further easing by the BOE.
The UK Inflation Impact
The UK’s gradual disinflation reduces the risk of economic stagflation, limiting the downside for GBP/USD. Current support levels are at 1.3250 and 1.3216. Further underperformance of the GBP is anticipated against the euro and Canadian dollar, as the ECB concludes easing and Canada prepares to announce a stimulative budget.
With UK inflation coming in cooler than expected, we see continued downward pressure on the pound in the near term. Derivative traders can position for this by considering short positions on GBP futures contracts. This move anticipates the Bank of England’s likely pivot towards easing monetary policy before the year is out.
This view is reinforced by recent data from earlier in October 2025, which showed UK GDP growth had slowed to just 0.1% in the third quarter while retail sales figures unexpectedly contracted. We saw a similar dynamic play out in the aftermath of the 2008 financial crisis, where slowing inflation and growth prompted swift central bank action. This historical precedent and current economic softness make the case for a November or December rate cut very compelling.
Trading Opportunities
For the GBP/USD pair, we are watching key support levels at the October 14 low of 1.3250 and the 200-day moving average near 1.3216. Traders could look at buying put options with strike prices below the current market, a strategy that would profit if the pound breaks through these floors. This offers a defined-risk way to bet on further sterling weakness heading into the Bank of England’s November 6 meeting.
We also see opportunities in currency crosses, particularly against the euro and the Canadian dollar. Since the European Central Bank is likely finished with its own easing cycle, a long EUR/GBP position through futures or forward contracts looks attractive due to this policy divergence. A similar trade would be to go long CAD/GBP, as Canada’s government is poised to deliver a stimulative budget on November 4, contrasting with the expected fiscal tightening in the UK.
The upcoming Bank of England meeting and the UK budget on November 26 are major catalysts for volatility. We anticipate significant price swings around these dates, making options strategies that profit from turbulence, such as straddles, a potential play. Traders can also use interest rate swaps to directly act on the market’s pricing of a 25 basis point cut by year-end, which now holds a 70% probability.
