GBP's 'punishment' continues

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waterman

Written by Dan Waterman
October 30th 2025
The Federal Reserve cuts its interest rate by 25bp as expected (the lowest level since 2022), but sits on the fence for December..

The Pound enters its 4th day of declines and it's still unclear whether this is overbought territory or not.

"A further cut in December is not a foregone conclusion, far from it" was the main headline out of Fed Chair Powell's press conference yesterday. This has aided the USD as it was a rather unexpected comment and money markets have lowered the rate cut chance to 60% at the next meet.

Yesterday in the weekly PMQ's, Prime Minister Keir Starmer refused to rule out raising income tax. If higher taxes do come (likely), it's once again another government and another party that has broken its election manifesto.

If the BoE is privately briefed by the government before the Budget, the central bank could cut interest rates in both November and December.

The bank is cautious about cutting rates because of high inflation, but if it thinks the budget will help bring inflation down, then it will act to support businesses and households by lowering interest rates.

What this all means for the Pound is rather unclear as we have some commentators thinking this is good news based on clarity and moving forward, but others (ourselves included) think this is going to be more bad news with economic growth slowing and interest rates lower.

The meeting between President Trump and President Xi seems to have gone well, but markets have yet to respond. A full trade deal is expected to be signed 'soon', but both parties seem to be happy with how things went and the end of this headwind would be good for investor sentiment and therefore GBP.