GBP/USD held near 1.3620 after the latest US inflation report pushed traders to raise the chances of a Federal Reserve rate cut in June.
The pair was little changed on the day and was on track to finish the week up 0.12%.
The US inflation data has changed our view. Prices rose just 0.1% month-on-month, below market forecasts. This makes it easier for the Fed to start cutting rates. Market pricing now puts the odds of a June cut above 75%. This shift is weighing on the US dollar.
With this backdrop, we see room for more GBP/USD gains in the weeks ahead. One way to express this view is to buy GBP/USD call options that expire in late June or July. These would benefit if the exchange rate rises on expectations of easier Fed policy.
We also need to account for policy divergence, which is a big change from most of 2025, when central banks largely moved together. UK inflation remains high—3.5% last month—well above the Bank of England’s target. That suggests the BoE may keep rates unchanged for longer. A softer Fed alongside a steadier BoE should support the pound.
Still, upcoming data will matter, especially the next US non-farm payrolls report. A much stronger jobs reading could reduce expectations for a June cut and push implied volatility higher. Because of this, strategies such as bull call spreads may be a sensible way to limit cost and manage risk.
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