GBP/USD failed to build on an Asian lift towards 1.3500 and traded around 1.3475–1.3480, almost flat on the day. It stayed above the 100-day Simple Moving Average (SMA) as traders waited for the Bank of England (BoE) decision and US inflation data.
The BoE was due to announce policy and was expected to keep rates unchanged. Market pricing indicated a higher chance of two rate rises in 2026, linked to inflation risks from higher energy prices, with attention on the statement, press conference, and Andrew Bailey’s guidance.
Intraday Price Action
On Wednesday, GBP/USD tried to hold 1.355 before falling, then hit a low near 1.3460 after 18:00 GMT and later closed near 1.3480. A Donald Trump Truth Social post after 08:00 GMT helped lift Brent above $110/bbl, supporting the US Dollar.
The Fed held rates at 3.5% to 3.75% with the most divided FOMC vote since 1992. Powell’s press conference pushed the 10-year US Treasury yield above 4.4%, and GBP/USD was near 1.3480, down 0.30%.
Thursday’s schedule included the BoE decision at 11:00 GMT, Bailey at 11:30 GMT, and US releases at 12:30 GMT: March PCE, Q1 advance GDP, Q1 Employment Cost Index, and weekly jobless claims. Chicago PMI followed at 13:45 GMT.
Powell said he would remain a Governor until a criminal investigation ends, keep a low profile, and stay after May 15, when his eight-year term as Chair ends.
Market Backdrop Since Late 2025
We can see how much the landscape has changed since late 2025 when GBP/USD was struggling to hold 1.3500. The divergence between the Federal Reserve and the Bank of England, which we saw hints of back then, has now become the market’s main story. The pair is currently trading much lower, near 1.2850, reflecting sustained dollar strength.
The Fed’s hawkish tilt at Jerome Powell’s final meeting was not a bluff, and the trend has continued under Chair Warsh. With the federal funds rate now at 4.25-4.50% and the 10-year Treasury yield sitting at 4.7%, the dollar remains the clear favourite. The latest Core PCE reading from March came in at a sticky 3.1%, giving the Fed little reason to signal a dovish pivot anytime soon.
Meanwhile, the Bank of England has been more hesitant than the two rate hikes we priced in for 2026 might have suggested. While they did hike once, recent UK CPI data showing inflation at 3.5% is now coupled with weakening growth forecasts. This policy conflict is weighing on Sterling, making it difficult for the currency to find a footing against the high-yielding dollar.
For traders, this suggests continued pressure on the GBP/USD pair in the weeks ahead. Buying put options with a strike price around 1.2700 could be a prudent way to position for a potential slide towards the 2025 lows. This strategy offers a defined risk while capturing any further downward momentum driven by central bank divergence.
Alternatively, for those expecting the pair to become range-bound after its recent drop, selling volatility could be attractive. Implied volatility is lower than during the chaotic period in late 2025, suggesting a strategy like selling a strangle with strikes at 1.2750 and 1.2950 might yield positive theta decay. This profits if the pair remains contained as the market awaits fresh catalysts.
Looking ahead, the upcoming US non-farm payrolls report will be critical for gauging the Fed’s next move. Any signs of a still-hot labor market will likely reinforce the dollar’s dominance. Traders should also watch for any change in tone from Bank of England officials regarding the UK’s growth outlook.
