Options Traders Sour on Pound as Bets on BOE Rate Cuts Grow

Options traders are turning against the pound as the UK currency heads for its longest losing streak against the dollar in two years.

One-month risk reversals — which show the difference in demand for bullish and bearish options — reflect the most negative outlook for the pound since February. The measure spans the next Bank of England and Federal Reserve decisions, as well as President Donald Trump’s Aug. 1 tariff deadline.

Traders added to bets on BOE easing on Monday after Governor Andrew Bailey hinted at bigger interest-rate cuts if the jobs market deteriorates more quickly expected.

Sterling fell as much as 0.3% to a three-week low of $1.3452 on Monday. A lower close would mark a seventh straight day of losses, the longest since July 2023.

The pound is being pressured by broad dollar strength after Trump escalated trade tensions over the weekend. A downturn in the UK’s economic is adding to bearish sentiment.

That’s also feeding into the outlook for central banks. Money markets now assign an 80% probability that the BOE will cut rates by 25 basis points at its next meeting, while the Fed is expected to remain on hold until at least September.

All eyes will be on a critical run of data this week, including inflation reports from both the UK and US, as well as UK labor figures.