GBP/USD rose by more than 1% on Wednesday after the US and Iran agreed to a Pakistan-brokered two-week ceasefire, reaching about 1.3485. It later fell back towards 1.3400 as questions emerged about how long the deal would last, while JD Vance called it a “fragile truce” and Israel launched its largest assault on Lebanon since the war began, excluding the Hezbollah front from the terms.
UK data released on Wednesday were weak. Halifax house prices fell 0.5% month on month in March versus a forecast 0.1% rise, the S&P Global Construction PMI printed 45.6 versus 44.5 previously, and the RICS housing price balance dropped to -23%, its lowest since early 2024.
Fed Signals And Market Reaction
The Fed’s March minutes showed an 11–1 vote to keep the federal funds rate at 3.50% to 3.75%. Officials noted higher near-term inflation expectations linked to oil prices and tariffs, the median outlook still indicates one 25 basis point cut this year, and some members said a hike could be needed if inflation stays above target.
Thursday includes the BoE Q1 Credit Conditions Survey, plus US core PCE for February, Q4 GDP, and weekly jobless claims, followed by Friday’s March CPI and the University of Michigan’s preliminary April sentiment and inflation expectations. On a 15-minute chart, GBP/USD was 1.3399, above the 200-period EMA at 1.3354, with Stochastic RSI near 81.
We remember well how this time last year, in early 2025, GBP/USD saw a temporary surge on a fragile ceasefire deal. The rally was fleeting, as doubts about the deal and underlying economic weakness in the UK quickly took over. This serves as a critical reminder that geopolitical headlines can create false momentum.
That weak UK housing data from March 2025, with prices falling and surveys plunging, was an early signal of the slowdown that prompted the Bank of England to cut rates twice in the second half of that year. Today, the situation has only marginally improved, with the latest Nationwide House Price Index for March 2026 showing a meager 0.2% annual rise. UK economic growth remains stagnant, with Q4 2025 GDP confirmed at just 0.1%, justifying the market pricing in at least one more BoE rate cut by this autumn.
Strategy Implications For Gbp Usd
Conversely, the Federal Reserve’s hawkish tone from those March 2025 minutes proved prescient, as they only delivered one rate cut late in the year. US inflation has remained stubbornly persistent, with the most recent core PCE reading for February 2026 coming in at 2.9%, still well above the Fed’s target. This wide and persistent policy divergence between a dovish BoE and a patient Fed continues to put fundamental pressure on the pound.
Given this backdrop, we should view any strength in GBP/USD as an opportunity to establish bearish positions. Buying put options with expiry in the next 4-6 weeks provides a clear, risk-defined way to trade an expected decline. This strategy allows us to profit from the fundamental weakness without being overexposed to the kind of sharp, headline-driven reversals we saw last year.
The sharp spike to 1.3485 in 2025 reminds us that volatility can be unpredictable. Therefore, selling out-of-the-money call spreads could be an effective strategy to generate income and capitalize on the view that the pair’s upside is limited. This is particularly attractive if the pair rallies towards the 1.2700 resistance level, a key technical barrier throughout early 2026.
