Societe Generale reports pressure on the British Pound and Gilts as the Bank of England responds to persistent inflation and wage data. Rate cuts have slowed, and longer-dated Gilts have weakened.
GBP/USD has retreated after failing near 1.3660 and has moved below the 200-day moving average. The 200-DMA is around 1.3430, with intraday resistance at 1.3430 and support at 1.3220.
Technical Levels And Market Direction
If GBP/USD cannot regain 1.3430, the next support area is the March low at 1.3220/1.3150. A move below that zone could extend the downtrend.
Societe Generale forecasts April headline inflation at 3.0% year on year and core inflation at 2.6% year on year, matching consensus. Private-sector wages are forecast to rise 3.1% year on year for the three months ending March.
The note also references political events, including an announced leadership challenge to Prime Minister Starmer. It also mentions a Makerfield by-election, likely on 18th June, and that Makerfield voted to leave the EU in 2016.
We recall that back in 2025, the pound’s failure to hold above its 200-day moving average was a key signal of weakness. That technical break, combined with political uncertainty around the Starmer government, set the stage for a significant downturn. The inability to reclaim the 1.3430 level at that time confirmed a lack of buying interest.
Options Strategies For Bearish Sterling
Those concerns proved to be well-founded, as sticky wage data throughout late 2025 and early 2026 kept the Bank of England on a hawkish footing. While the latest Office for National Statistics data shows headline CPI has cooled to 2.3%, wage growth remains stubbornly high at 5.7%, preventing the central bank from cutting rates aggressively. This has continued to pressure the pound against the dollar, especially as the US economy shows more consistent strength.
As we predicted, the GBP/USD pair did break below the 1.3220 support level mentioned in 2025, and the downtrend has extended. With the pair now trading around 1.2950, the path of least resistance remains to the downside. The market has priced out several of the BoE rate cuts that were once anticipated for this year.
Given this bearish momentum, traders should consider buying 1-month to 3-month put options to position for a further slide. This strategy offers a defined risk while providing exposure to downside moves, potentially towards the 1.2800 psychological level. The cost of these options is justifiable given the clear technical and fundamental pressures on sterling.
For a more cost-effective approach, look at implementing bear put spreads. This involves buying a put option at a higher strike price, like 1.2900, and simultaneously selling another put at a lower strike, such as 1.2750. This trade reduces the initial cash outlay and profits from a moderate decline in the pound.
Implied volatility for the pound, as measured by the CBOE British Pound Volatility Index (BPVIX), is currently elevated around 8.5, reflecting ongoing uncertainty. To take advantage of this, consider selling out-of-the-money call spreads with strikes well above current resistance, such as a 1.3100/1.3200 spread. This position will profit from both a falling price and a decline in volatility as time passes.
