GBP/USD fell on Tuesday after rebounding from 1.3510 on Monday. The pair closed at 1.3641, down 0.39%. It dropped from 1.3700 and formed a bearish daily candle near the 50% Fibonacci retracement of the 1.3869–1.3510 move, around 1.3690.
The price is still above the 50 EMA at 1.3512 and the 200 EMA at 1.3352. However, the pullback from 1.3869 has created a lower-high pattern, which could weaken the uptrend.
BoE Policy And Uk Politics
The Bank of England has turned more dovish after a close 5–4 vote to keep rates at 3.75%. The Pound is also under pressure because of UK political uncertainty tied to Prime Minister Starmer’s leadership.
The Stochastic Oscillator (14, 5, 5) is at 51.21/57.04. %K has crossed below %D while still in neutral territory, which suggests softer momentum heading into Wednesday.
On Wednesday at 5:30 AM, the BLS will release the delayed January NFP report. The consensus forecast is 70K, up from 50K in December. The release also includes the benchmark revision, the unemployment rate (4.4%), and earnings (0.3% MoM, 3.6% YoY).
At 11:00 PM, the UK will publish preliminary Q4 GDP (0.2% QoQ vs. 0.1% previously), December GDP (0.1% MoM), and December industrial and manufacturing output (both 0% MoM). Three Fed speakers—Schmid, Bowman, and Hammack—are also scheduled.
Strategy Outlook And Risk
GBP/USD is showing signs of fading strength near 1.2750 and is struggling to hold recent gains. This setup looks similar to early 2025, when a rebound stalled near 1.3700. Momentum appears to be turning, which suggests rallies may be brief and could offer chances to position for further weakness.
The main driver is the widening policy gap between a cautious Bank of England and a steadier Federal Reserve. UK inflation for January 2026 came in at 2.9%, supporting the view that the BoE may need to cut rates sooner rather than later. In contrast, the US remains firmer: last week’s jobs report showed 210,000 new payrolls, and inflation is still sticky at 3.2%, giving the Fed little reason to ease.
With this backdrop, volatility may rise, which can make options more appealing. Buying GBP/USD put options could help protect against a move down toward the 1.2600 support area in the coming weeks. This lets traders cap risk while still benefiting if the Pound weakens.
This pattern also echoes February 2025, when a dovish 5–4 BoE split helped cap Pound strength. UK Q4 GDP at that time was just 0.1%, which supported a bearish view. Today’s environment looks similar, with slowing growth again pushing the BoE toward a more dovish stance.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
