GBP/USD extended a pullback from the 1.3575 area and fell further on Tuesday. It moved down to around the 1.3500 level in early European trading, supported by firmer US Dollar demand.
Further moves were limited as markets awaited this week’s central bank decisions. The US Federal Reserve is due to announce its decision on Wednesday, followed by the Bank of England on Thursday.
Pound Under Pressure Ahead Of Boe
The pound was trading about 0.2% lower near 1.3500 against the dollar during the European session. Selling pressure was linked to uncertainty ahead of the BoE announcement.
The BoE is widely expected to keep rates at 3.75%, with an 8-1 vote split. The expectation follows cooler UK core CPI growth in March, while elevated energy prices and the prolonged closure of the Strait of Hormuz were cited as ongoing inflation risks.
As we approach the end of April 2026, the GBP/USD pair is hovering near 1.2450, facing pressure as the US dollar finds strength. All eyes are now on the upcoming policy meetings for the US Federal Reserve this Wednesday and the Bank of England on Thursday. These events are creating caution in the market, limiting any significant moves until we get more clarity from both central banks.
The focus for the Fed meeting is sticky inflation, as the latest US Consumer Price Index for March 2026 came in hotter than expected at 3.1%. This figure has traders believing the Fed will push back any plans for interest rate cuts, likely signaling a “higher for longer” stance. A hawkish tone from the Fed would almost certainly add more strength to the US dollar.
Options Ideas For Event Risk
Meanwhile, the situation in the UK is different, with its own March inflation data showing a more encouraging drop to 2.5%. With UK economic growth remaining sluggish, the Bank of England is facing more pressure to consider cutting rates sooner than its US counterpart. This growing policy divergence between the two central banks is putting downward pressure on the pound.
For derivative traders, the rising uncertainty means implied volatility is increasing ahead of these announcements. This environment suggests that buying options, such as straddles, could be a viable strategy to capitalize on a significant price swing in either direction. The cost of these options will be higher, but a sharp move post-announcement could make it worthwhile.
Given the stronger US data, we see a clearer path for those with a bearish outlook on the pound. We remember last fall, in 2025, when similar hawkish signals from the Fed sent the pound tumbling below 1.2200. Traders may consider buying GBP/USD put options to profit from a potential drop, or use put spreads to define risk and lower the upfront cost.
