GBP/USD fell 0.17% on Thursday after US jobs data beat the UK GDP release. It traded near 1.3534 after hitting a two-month high of 1.3594 earlier in the session.
US Initial Jobless Claims dropped to 207K from 218K for the week ending April 11, below the 215K forecast. US Industrial Production fell from 0.7% to -0.5% month-on-month in March, with motor vehicles, parts, and utilities posting the largest declines.
Fed Policy And Inflation Risks
Federal Reserve messaging indicated no change in stance, while officials referred to inflation risks linked to Middle East tensions. Stephen Miran said he expects three rate cuts rather than four due to less favourable inflation developments.
UK GDP rose by 0.5% month-on-month in February, above the 0.1% estimate. Sterling had fallen 1.9% in March amid Middle East conflict and the closure of the Strait of Hormuz, then rebounded as peace-deal hopes lifted the pair back above 1.3500.
Reports also pointed to rising expectations of two Bank of England rate hikes in 2026. Donald Trump said Israel and Lebanon agreed to a 10-day ceasefire starting Thursday at 5:00 PM EDT, alongside talks linked to reopening the Strait of Hormuz.
Technically, GBP/USD remained above 50-, 100- and 200-day simple moving averages near 1.3427, with support around 1.3490–1.3492. A break below 1.3427 would weaken the near-term setup.
Trading View And Risk Factors
The current strength in the GBP/USD is built on fragile optimism, so we should be cautious. While the price has rallied on hopes for a Middle East peace deal and expectations for Bank of England rate hikes, the fundamental vulnerability of the UK as a net energy importer remains. This suggests the recent move above 1.3500 could reverse quickly if sentiment sours.
We should consider the divergence in central bank policy as a key driver for the coming weeks. Looking back, we saw UK inflation remain stubbornly high through much of 2025, which is why the market is now pricing in a 70% chance of two BoE rate hikes in 2026. In contrast, the US Federal Reserve is still talking about rate cuts, creating a policy path that favors Sterling strength and makes long positions in GBP/USD futures or buying call options attractive.
However, the US economy is sending mixed signals that warrant attention. While the strong initial jobless claims data, which fell to 207,000, points to a robust labor market, the sharp 0.5% contraction in industrial production shows significant weakness in manufacturing. This uncertainty creates an environment for heightened volatility, making a long straddle strategy, which profits from a large move in either direction, a prudent approach.
Geopolitical risks are the most immediate threat to the pound’s rally. We remember how the initial closure of the Strait of Hormuz in March 2025 caused Sterling to drop 1.9% in a month due to soaring energy prices. A breakdown in the current ceasefire talks or peace negotiations with Iran would likely trigger a similar sell-off, making out-of-the-money put options a cost-effective hedge against our long positions.
The technical picture provides clear levels to watch for any change in momentum. The support trend line around 1.3490 is the first critical test for the current uptrend. A decisive break below the cluster of moving averages near 1.3427 would signal that the upward momentum has failed and should be seen as a trigger to exit long positions.
