GBP/USD edged up in Asian trading on Wednesday, near 1.3520, after small losses the day before. On the daily chart it is near the lower edge of an ascending channel, which can point to a bearish reversal risk.
The pair is still trading above the nine-day Exponential Moving Average and the 50-day EMA. The 14-day Relative Strength Index is near 56, suggesting upward momentum that is not stretched.
Technical Picture And Near Term Bias
On Tuesday, GBP/USD fell 0.12% and closed near 1.3520, staying in a consolidation zone around 1.3500. It moved about 115 pips between 1.3465 and 1.3580, with early gains fading before a late rebound from the lows.
Markets are focused on the Bank of England decision on Thursday at 11:00 UTC. The Bank Rate is expected to stay at 3.75%, with an MPC vote forecast at 8-1-0 versus the previous 9-0-0 hold.
The Monetary Policy Report and Governor Bailey’s press conference are due at 11:30 UTC. A speech from MPC member Pill is scheduled for Friday at 11:15 UTC.
Looking back to 2025, we recall when the GBP/USD pair was consolidating around the 1.3500 level, with the market anticipating a Bank of England rate hold at 3.75%. Today, that environment has changed significantly, as we see the pair trading much lower, around 1.2850. The technical supports that held last year have since given way to a different market reality.
Policy Divergence And Trading Implications
The key driver for this shift has been the divergence in central bank policy throughout late 2025 and early 2026. While the Bank of England did raise rates further, it has recently begun an easing cycle, cutting the Bank Rate to 5.25% to support a sluggish economy. In contrast, the US Federal Reserve has maintained its rate at 5.00%, showing less urgency to cut amidst more resilient economic data.
Recent data from the Office for National Statistics shows UK inflation is now at 2.8%, down from its peaks but still stubbornly above the 2% target. This has created uncertainty, as the market is now pricing in at least two more rate cuts from the BoE by the end of this year. This expectation is weighing on the pound and suggests the path of least resistance is downwards.
For the coming weeks, traders should consider positioning for further potential weakness in the pound against the dollar. Buying GBP/USD put options offers a direct way to profit from a decline, especially ahead of the next BoE meeting in May. Using strategies like bear put spreads can also be effective, as they lower the upfront cost of the trade while defining the risk in this volatile environment.
