GBP\/USD rose past 1.3400 on Thursday and traded at 1.3441, up 0.36%, as risk appetite weakened amid fresh tensions in the Middle East. Israel struck Lebanon during its conflict with Hezbollah, and the ceasefire was described as fragile.<\/p>\n
US equities were little changed, while the US Dollar Index (DXY) edged up 0.01% to 99.01 after a 1% fall over the prior two days. Iran did not indicate it would open the Strait of Hormuz, and Israel\u2019s renewed attacks were reported to have killed more than 250 people.<\/p>\n
US inflation data showed the February PCE Price Index rose 0.4% month-on-month versus 0.3% previously, and held at 2.8% year-on-year. Core PCE was 0.4% month-on-month, and eased to 3% year-on-year from 3.1%.<\/p>\n
Money markets priced about six basis points of Federal Reserve easing by year-end, per CME FedWatch. Initial Jobless Claims rose from 203K to 219K versus 210K forecast, while Continuing Claims fell 38K to 1.794K, the lowest since May 2024.<\/p>\n
UK pricing showed a 21% chance of a Bank of England rise on 30 April and expectations of a June 18 move, with 39 basis points of tightening for the year. March US CPI is forecast at 3.3% headline (from 2.4%) and 2.7% core (from 2.5%).<\/p>\n
Technically, GBP\/USD was near 1.3437, with resistance around 1.3439; support levels referenced 1.3137 and 1.3785.<\/p>\n
Looking back to this time in 2025, we saw the pound rally past 1.3400, fueled by expectations of Bank of England rate hikes and Middle East tensions that weakened the dollar. The market was then pricing in nearly 40 basis points of tightening from the BoE for the remainder of that year. That entire narrative has since inverted over the last twelve months.<\/p>\n
Today, the BoE is on an extended pause as UK inflation, while down from its peaks, has remained stubbornly above target and economic growth has stalled, with the latest Q1 2026 GDP figures showing a meager 0.1% expansion. In contrast, the US Federal Reserve has maintained a hawkish stance as core PCE has struggled to get below 2.8%, a figure that has been persistent for several quarters. This policy divergence is now the market’s primary focus.<\/p>\n
This shift has pushed GBP\/USD down significantly from its 2025 highs, with the pair now consolidating around the 1.2550 mark. The key support level around 1.3137, which we watched last year, was broken decisively and now acts as a distant memory of prior strength. The path of least resistance for the currency pair currently appears to be lower.<\/p>\n
Given this sustained downtrend, we should consider buying GBP\/USD put options with expiries in the next 4 to 8 weeks. This provides a clear directional bet on further sterling weakness while capping our maximum potential loss to the premium paid. It also positions us to benefit from any sudden increase in market volatility.<\/p>\n
For a more conservative approach, we can look at selling out-of-the-money call spreads with strike prices well above current levels, such as around the 1.2800 handle. This strategy allows us to collect premium income from the view that the pound is unlikely to stage a significant recovery in the near term. The trade profits from both a falling price and time decay.<\/p>\n
The interest rate differential now strongly favors holding US dollars over pounds, a complete reversal from the sentiment in early 2025. We can use forward contracts to short GBP\/USD, which allows us to benefit from this positive carry. This means we are effectively paid to hold the short position, adding a small but steady tailwind to the trade.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD climbed above 1.3400 as Middle East tensions, firmer US inflation, and mixed Fed\/BoE expectations weighed.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-44567","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44567","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=44567"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44567\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=44567"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=44567"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=44567"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}