Fundamental Market Analysis for October 21, 2025 GBPUSDThe pound has retreated from last week’s highs as the market prepares for fresh UK price data and weighs it against recent Bank of England signals. After the August rate cut to 4.00%, policymakers emphasize that any further easing should be cautious given the risk of still-elevated inflation—higher than in most G7 peers. That tempers excessive optimism on sterling and makes the reaction to CPI potentially asymmetric: softer prices would support expectations of later cuts, while stickier readings would revive concern about persistent inflation.
The US backdrop works against cable: the ongoing partial suspension of federal agency operations in the US boosts demand for the reserve currency during bouts of uncertainty, and high US real yields continue to attract global capital. Until markets receive a clean run of US data and clarity on the budget, the dollar’s near-term advantage remains.
Domestic fundamentals also constrain sterling: households remain sensitive to borrowing costs, business investment is uneven, and the services surplus cannot fully offset external risks. As a result, scope for a swift sterling advance is limited, with the balance of risks favoring moderate profit-taking after the climb toward the 1.34 area.
Trading recommendation: SELL 1.34050, SL 1.34550, TP 1.33550
