GBP/USD traded near 1.3530 on Tuesday, up 0.30%. This gain came even after Bank of England Governor Andrew Bailey said the March meeting will consider whether a rate cut is warranted. The pair moved higher amid uncertainty over US trade policy and a firmer US Dollar.
Overall market sentiment improved. However, software stocks stayed under pressure after reports that an Anthropic AI model can modernise software used in most ATMs worldwide, powered by IBM. The US Dollar Index (DXY) rose 0.16% to 97.85 after rebounding from weekly lows.
Us Data And Fed Messaging
US data signaled better job sentiment and easing inflation pressure. The Conference Board’s Consumer Confidence index rose to 91.2 in February, up from an upwardly revised 89.
Chicago Fed President Austan Goolsbee supported keeping rates unchanged and said 3% inflation “is not good enough” compared with the 2% target. Atlanta Fed President Raphael Bostic also said policymakers must stay focused on inflation.
Bailey pointed to some weakness in the labour market and wrote that “with inflation returning to target, there should be scope for some further easing in monetary policy.”
The US introduced 10% global tariffs under Section 122, though duties were set at 15% for 150 days. In the UK, politics faces a test with an election in Manchester’s Gorton and Denton on Thursday.
On the charts, GBP/USD was around 1.3521. Support sits near 1.3450 and 1.3400, while resistance is near 1.3700 and then 1.3800.
Fundamentally, the gap between US and UK monetary policy is widening. The Bank of England is signaling possible rate cuts, while Federal Reserve officials continue to back holding rates steady. Over time, this kind of policy split usually supports a stronger US Dollar versus the Pound.
Even so, the pound is holding above 1.3500, which creates a challenge for traders. UK inflation has fallen steadily from above 4% in late 2025 toward the 2% target, supporting the BoE’s more dovish tone. The fact that GBP/USD is still resilient suggests the market may not be fully pricing in the risk of a UK rate cut.
Event Risk And Trade Positioning
In the US, new global tariffs and stronger consumer confidence are helping the dollar. The Federal Reserve—after keeping rates steady through 2025 to bring inflation down—still looks likely to maintain that stance. This makes the dollar more attractive than currencies where central banks may start easing.
A key near-term risk is Thursday’s UK by-elections in Manchester. A poor result for the Labour government could increase political uncertainty and trigger a sharp drop in the Pound. That makes holding GBP/USD long positions into the end of the week especially risky.
For derivatives traders, high uncertainty often shifts the focus to volatility. Buying GBP/USD put options with a strike around 1.3450 could be a sensible way to position for a negative political surprise. This approach limits risk while keeping exposure to potential downside.
The key technical level is 1.3400. A clear break below this support—possibly driven by the election result—would point to a stronger bearish trend. Trades that benefit from a breakdown, while controlling risk ahead of the event, should be the main focus.
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