GBP/USD rose during the North American session on Wednesday as the US Dollar paused amid uncertainty over US trade policy. The pair traded at 1.3523, up 0.29%.
With little US or UK data, markets focused on comments from Federal Reserve and Bank of England officials, as well as expectations for interest-rate changes. The BoE previously held the Bank Rate in a 5–4 vote, and money markets have priced in 18 basis points of easing by the 19 March meeting.
Central Bank Signals And Market Pricing
BoE Governor Andrew Bailey said a March cut is possible, but noted that services inflation remains high. In the US, Chicago Fed President Austan Goolsbee said cuts make sense if inflation continues to fall, but warned against “front loading” reductions without clear evidence inflation is moving toward the Fed’s 2% goal.
Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin said the labour market is steady but easing, while progress on inflation remains uneven. Markets do not expect a Fed cut at the next meeting. Traders have priced in 50 basis points of easing for the rest of the year, based on Prime Market Terminal data.
On Thursday, the UK calendar is empty, with comments due from BoE’s Lombardelli. In the US, traders will watch Initial Jobless Claims and a speech from Fed Governor Michelle Bowman.
From a technical view, GBP/USD traded near 1.3528, with broader support at 1.3035 and resistance at 1.3869. Near-term resistance is around 1.3560, with higher levels at 1.3680 and 1.3835. Support is near 1.3500, then 1.3460 and 1.3400.
Shift In Policy Divergence Since Early 2025
In early 2025, markets expected the Federal Reserve and the Bank of England to cut rates at a similar pace. That has changed. Data from early 2026 now points to a clear policy split between the two central banks, and this divide has become the main driver of GBP/USD.
A BoE cut—seen as possible in March 2025—is no longer expected because services inflation remains stubbornly high. The latest January report showed services inflation at 5.9%. As a result, derivatives markets are now pricing in nearly 30 basis points of additional tightening from the BoE by year-end. This more hawkish pricing supports Sterling and keeps buying on major dips on the radar.
In the US, the 50 basis points of cuts expected for 2025 did happen, but further easing has slowed. A strong January 2026 jobs report, showing 225,000 new jobs, has pushed back expectations for a March cut. The CME FedWatch Tool now puts the chance of a March cut at only 15%, which helps support the US Dollar.
This policy tension could bring more volatility in the coming weeks. Implied volatility in 3-month GBP/USD options has risen from about 6.5% late last year to above 8.2%, suggesting the market expects bigger swings. Traders may consider options strategies, such as strangles, to position for a possible breakout from the recent range.
The technical setup discussed in 2025 is no longer relevant. The rising support trendline near 1.3500 was decisively broken late last year. That level now acts as major resistance, and the pair is currently struggling near 1.3310. The key downside level to watch is the post-Brexit support zone around 1.3200.
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