GBP/USD rose 0.6% on Thursday to about 1.3550 after the Bank of England kept rates at 3.75% in an 8-1 vote and US first-quarter GDP growth came in below forecasts.
BoE Governor Andrew Bailey said it was “reasonable” to hold rates at 3.75% given UK conditions and uncertainty linked to the Middle East. He also said it would be a mistake to wait for second-round effects before acting.
Uk Us Data In Focus
In the US, new unemployment benefit claims fell to 189K in the week ending 25 April, compared with expectations of 215K. The prior week’s figure was revised to 215K from 214K.
The PCE Price Index rose to 3.5% year on year in March from 2.8% in February, matching expectations, and increased 0.7% month on month. Preliminary Q1 GDP showed the economy grew at a 2% annualised rate versus 2.3% expected.
On the four-hour chart, GBP/USD traded at 1.3556, above the 20-period SMA at 1.3513 and the 100-period SMA at 1.3501, with RSI near 61. Resistance sits at 1.3561, while support levels include 1.3535, 1.3517, 1.3501 and 1.3499.
We saw a similar dynamic in 2025, when a hawkish Bank of England and weak US GDP pushed the pound higher against the dollar. Today, however, the Bank of England is leaning towards rate cuts later this year as UK inflation, while still elevated, has eased to 3.2%. This contrasts sharply with the firm hawkish tone from that period, creating a different setup for the currency pair.
Policy Divergence And Market Implications
The weakness in US economic growth is a recurring theme, as the recent Q1 GDP reading of 1.6% came in well below expectations, echoing the slowdown we observed back in 2025. Despite this slowdown, inflation remains a challenge, with the latest Personal Consumption Expenditures index at 2.7%, keeping the Federal Reserve cautious. The strong labor market, with initial jobless claims recently near 208,000, further complicates the Fed’s path toward any rate cuts.
This divergence in central bank policy suggests a different trading environment for the pound versus the dollar in the coming weeks. With the Federal Reserve likely holding rates firm due to persistent inflation and the Bank of England signaling potential cuts, the path of least resistance for GBP/USD may be downwards. Traders might consider buying put options on the pound to hedge against or profit from a potential decline toward the 1.2400 level.
The mix of slowing growth and sticky inflation creates significant uncertainty, which is likely to increase market volatility. We saw how conflicting data caused sharp moves in 2025, and today that pattern is repeating itself. This environment suggests that option strategies designed to profit from price swings, such as long straddles or strangles, could be effective for navigating the choppy weeks ahead.
