GBP/USD rose during Wednesday’s North American session after the US Dollar lost momentum on 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, along with expectations for interest-rate moves. The BoE previously held the Bank Rate in a close 5-4 vote. 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 is still high. In the US, Chicago Fed President Austan Goolsbee said cuts make sense if inflation keeps falling. However, he warned against “front loading” cuts without clear proof inflation is moving toward the Fed’s 2% goal.
Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin said the labour market looks steady but is slowly loosening. They also noted that progress on inflation has been 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, according to Prime Market Terminal data.
On Thursday, the UK calendar is empty, and markets will watch comments from BoE’s Lombardelli. In the US, traders will focus on Initial Jobless Claims and a speech from Fed Governor Michelle Bowman.
From a technical view, GBP/USD traded near 1.3528. It is supported around 1.3035 and faces resistance near 1.3869. Near-term resistance sits around 1.3560, followed by 1.3680 and 1.3835. Support is around 1.3500, then 1.3460 and 1.3400.
Shift In Policy Divergence Since Early 2025
In early 2025, markets expected both the Fed and the BoE to cut rates in a similar way. That has changed. Data from early 2026 now points to a clear split in policy between the two central banks. This gap has become the key driver of GBP/USD.
A BoE cut—seen as possible in March 2025—now looks unlikely. Services inflation remains stubbornly high and came in at 5.9% in the latest January report. Because of this, derivatives markets are pricing in almost 30 basis points of additional tightening by the BoE by year-end. This more hawkish pricing supports Sterling and makes buying on deep pullbacks a reasonable approach.
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 just 15%, which helps support the US Dollar.
This policy push-and-pull could lead to bigger moves in the weeks ahead. Implied volatility in 3-month GBP/USD options has climbed from about 6.5% late last year to over 8.2%. That suggests the market expects wider price swings. Traders may consider options strategies such as strangles to benefit if the pair breaks out of its recent range.
The technical setup discussed in 2025 is no longer useful. The rising support trendline near 1.3500 broke clearly late last year. That level has now turned into major resistance, and the pair is currently struggling near 1.3310. On the downside, the key level to watch is the post-Brexit support zone around 1.3200.
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