GBP\/USD rose as the Bank of England cut rates by 25 basis points in a close 5\u20134 vote, with indications of hawkish sentiment. The pair traded at 1.3410, up 0.28%, boosted by a softer US Consumer Price Index, which decreased to 2.7% year on year in November.<\/p>\n
The US core inflation fell to 2.6% from 3%, reflecting moderated price pressures. Initial Jobless Claims for the week ending December 13 decreased to 224K, surpassing expectations of 225K. Despite these economic indicators, expectations for a 2026 Federal Reserve rate cut remained largely unchanged at 62 basis points.<\/p>\n
The BoE’s rate cut from 4% to 3.75% propelled GBP\/USD higher. The minutes from the BoE meeting indicated uncertainty about future interest rates, citing inflation persistence data that showed both positive signs and potential risks.<\/p>\n
Looking ahead, US economic data on Personal Consumption Expenditures Price Index and Michigan Consumer Sentiment will be significant. In the UK, traders will monitor November’s Retail Sales for a possible increase from 0.2% to 0.9% year on year.<\/p>\n
GBP\/USD technical analysis reveals bullish momentum is waning, with possible support at 1.3361 and resistance at 1.3460. A close below 1.3400 could lead to testing lower prices, while a rally above 1.3460 could target the 1.3500 level.<\/p>\n
The Bank of England’s split-vote rate cut gives us a reason to be bullish on Sterling, as it signals reluctance to ease policy further. However, the soft US inflation numbers are questionable due to the recent 43-day government shutdown. This creates significant uncertainty heading into year-end trading.<\/p>\n
We must be cautious about this US CPI print, as the data collection was incomplete. Looking back, we saw similar data reliability issues during the 35-day shutdown in 2018-2019, which led to sharp market reactions later. All eyes should now be on the upcoming PCE inflation data to either confirm or contradict this week’s soft reading.<\/p>\n
Given this level of doubt, implied volatility on GBP\/USD options seems unusually low, especially compared to the spikes above 20% we saw during the UK’s 2022 fiscal crisis. This suggests buying volatility through strategies like straddles could be prudent. Such positions would profit from a large price swing in either direction once the true inflation picture becomes clearer.<\/p>\n
For those leaning bullish on the pound, the failure to break the 1.3455 resistance level is a major warning sign. Instead of buying calls outright, a bull call spread would allow for upside participation while limiting the cost. This is a more capital-efficient way to express a view that the pair will grind higher but may not break out explosively.<\/p>\n
On the other hand, the fading momentum on the RSI and strong US jobless claims provide a case for a pullback. A drop below the 1.3400 level would target the key moving averages near 1.3350. A bear put spread is a defined-risk way to position for this potential short-term weakness in the cable.<\/p>\n
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