GBP/USD rose on the first trading day of the year, moving around 1.3470 during Asian hours on Friday. Daily chart analysis suggests the bullish trend may be weakening, as the pair stays just below the lower boundary of an ascending channel pattern. The nine-day Exponential Moving Average (EMA) is rising and is above the 50-day EMA, with the spot price staying above both. This shows support for the bullish trend, as short-term dynamics favor upward movement. The arrangement of the moving averages also supports this rise as the medium-term average continues to increase.

Impact of US Monetary Policy

The GBP/USD pair gained momentum on Friday, trading near 1.3480 during the early Asian session. Speculation about rate cuts from the US Federal Reserve has weakened the US Dollar, benefiting the British Pound. The Fed ended 2025 with its largest annual decline in eight years, and markets are expecting two rate cuts this year. The difference between US and UK monetary policies is making the Dollar less appealing. Currently, there’s about a 15.0% chance that the Fed will lower interest rates at its January meeting. We see a continuation of the trend that started last year when expectations of Fed rate cuts began to impact the US Dollar. The contrast between a dovish Fed and a cautious Bank of England is the key driver here. This situation suggests that GBP/USD may continue to rise.

Strategic Trading Considerations

Recent data from late 2025 shows US inflation cooling to 3.2%, giving the Fed room to ease its policy. In contrast, inflation in the UK ended the year at a higher 3.9%, forcing the Bank of England to stay firm. This economic difference supports the ongoing weakness of the Dollar against the Pound. Given the positive momentum, we should think about buying GBP/USD call options that expire in the next four to six weeks. This strategy gives direct exposure to any rise toward the three-month highs while setting our maximum risk to the premium paid, making it a simple way to capitalize on an anticipated upward movement. For those looking to reduce initial costs, a bull call spread is a great alternative. By buying a call option and selling a higher-strike call, we can greatly lower the net premium. This is a smart strategy if we expect a steady but not explosive increase in the exchange rate. Implied volatility for the pair is currently moderate, making options more affordable than during the uncertain spikes seen in mid-2025. The market now predicts an over 80% chance of a Fed rate cut by March, which should keep any significant dollar rallies in check. This creates a favorable environment for taking these bullish positions. Create your live VT Markets account and start trading now.

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