Pound Sterling eased after the UK March CPI release, slipping to about 1.3518 against the US Dollar while still keeping small gains. The ONS said headline CPI rose to 3.3% year on year from 3% in February, matching expectations.
Core CPI increased by 3.1% year on year, below the 3.2% forecast. Core CPI excludes food, energy, alcohol, and tobacco.
GBP/USD was near 1.3510 in Asian trading on Wednesday after modest losses, and stayed close to 1.3500. The US Dollar held steady after a report said Donald Trump would extend a ceasefire with Iran until talks make progress.
Reports also said JD Vance cancelled a planned visit to Islamabad after Tehran told Washington via Pakistan that it would not attend. On Tuesday, GBP/USD fell 0.15% and traded a roughly 60-pip range before ending near 1.3500.
US March Retail Sales rose 1.7% month on month versus a 1.4% forecast. The FXStreet content team is made up of economic journalists and FX experts who oversee published content.
Looking back at this time in 2025, we saw the Pound struggle around the 1.3500 level against the Dollar. The key takeaway was how a minor miss in core inflation data, which came in at 3.1% instead of the expected 3.2%, was enough to invite selling pressure. This highlighted the market’s extreme sensitivity to any signs that the Bank of England (BoE) was close to ending its rate-hiking cycle.
Fast forward to today, April 22, 2026, and that sensitivity has paid off, with the BoE having already cut interest rates twice this year as inflation has trended down. This is reminiscent of the period from late 2023 to early 2024, when UK headline inflation fell from 4.0% to 3.4% in just a few months, signaling a major policy shift was on the horizon. The US Federal Reserve, however, has been far more hesitant to cut rates, creating a policy divergence that weighs on the GBP/USD pair.
For derivative traders, this growing gap in central bank policy suggests that implied volatility may be underpriced. We anticipate that one-month volatility, which currently sits near 7.5%, could spike higher around future BoE and Fed meetings. Traders should consider buying option straddles to capitalize on sharp moves, as the market digests differing economic data from the UK and US.
The short-term geopolitical noise we saw in 2025, such as the US-Iran standoff, has now faded in importance compared to these fundamental interest rate differentials. The path of least resistance for Sterling appears to be lower as long as the BoE remains more dovish than the Fed. Therefore, using put options or selling futures contracts to express a bearish view on GBP/USD is a strategy to consider for the coming weeks.
