GBP/USD opened near 1.3300, fell through Thursday, and closed around 1.3220, down 0.65%. It remains below the 50-day EMA near 1.3400 and the 200-day EMA around 1.3360, while the Stochastic RSI is 73.
Since the Iran war began, rate pricing for the Bank of England has shifted quickly. In February, markets priced at least two 2026 rate cuts, after 150 basis points of cuts since August 2024 took Bank Rate to 3.75%.
Bank Of England Rate Expectations Shift
After the Strait of Hormuz closed and oil rose above $100, swaps moved to as many as four hikes by mid-March. Pricing has since eased to about two hikes, while BoE staff forecasts CPI inflation at 3.5% in Q3 2026 versus about 2% before the war.
Andrew Bailey said markets may be moving too fast, noting a unanimous hold in March and an assessment at the 30 April meeting. The UK imports about 40% of its oil and up to 60% of its natural gas, and the Ofgem price cap runs until July.
Technically, GBP/USD broke below its March 1.3200–1.3450 range and closed over 100 pips under the 200-day EMA. The 2026 high is 1.3870 and the March low is near 1.3080, with 1.2950–1.3000 next below.
US Nonfarm Payrolls are due Friday at 12:30 GMT, with consensus near +57K after -92K in February. Jobless claims were 202K, and thinner liquidity is expected due to Good Friday market closures.
Near Term Catalysts And Downside Risk
Given yesterday’s decisive break below key moving averages, the path of least resistance for the Pound is lower. The GBP/USD pair is now clearly targeting the March low near 1.3080, and the technical picture suggests we will get there soon. With the Stochastic RSI still not overbought, there is room for this downward momentum to continue.
The fundamental story is one of persistent inflation driven by the energy shock. The latest UK CPI data for February already showed an increase to 2.8%, and with Brent crude holding firm around $108 a barrel, the pressure on the Bank of England is only growing. This makes Governor Bailey’s attempts to talk down rate hike expectations seem increasingly difficult to maintain.
We see the market reflecting this uncertainty and bearish bias. The one-month risk reversal for GBP/USD, a gauge of sentiment in the options market, has plunged to a six-month low as traders increase bets on further downside. This indicates a strong preference for put options that would pay out if the Pound continues to fall.
For derivative traders, this setup favors strategies that profit from a continued decline. We believe buying puts or establishing bearish put spreads with strike prices targeting the 1.3080 low, and even the 1.3000 psychological level from late 2025, is a prudent approach. This allows for participation in the expected move lower while managing risk.
Today’s US Nonfarm Payrolls report is the immediate risk event, with strong jobless claims data suggesting an upside surprise is possible. A solid number would strengthen the Dollar and likely accelerate GBP/USD’s slide toward 1.3080, especially in the thin liquidity of the holiday-shortened session. We must be prepared for potentially sharp moves following the 12:30 GMT release.
