Insights 
VT 
GBP/USD rose by over 0.35% following a softer-than-expected US inflation report, which sustained expectations for further Federal Reserve rate cuts. The exchange rate reached 1.3226 after rebounding from a daily low of 1.3165.
US Consumer Price Index for April slightly missed forecasts, with a 0.2% increase against an expected 0.3%, slightly higher than March’s -0.1%. Core CPI at 0.2% was below the forecast of 0.3%, with annual inflation at 2.3%, slightly below estimates.
Uk Employment Figures
In the UK, employment figures indicated a cooling job market, lessening pressure on the Bank of England. Wage growth slowed to 5.6%, its lowest since November 2024, with the number of employees decreasing by nearly 33,000.
Market expectations for Federal Reserve interest rate cuts shifted from three to two based on recent data. For the BoE, 48.6 basis points of easing is projected by year-end, with no policy changes expected at the June meeting.
GBP/USD remains in a bullish trend despite falling below the 20-day Simple Moving Average at 1.3301. The first resistance levels are the 20-day SMA, followed by 1.3350 and 1.3400, while support lies at the week’s low of 1.3194.
The earlier part of this analysis outlines two essential data points that have affected the currency pair recently: lower-than-anticipated inflation in the United States and declining employment strength in the United Kingdom. The inflation figures coming from the US missed forecasts slightly across both headline and core measures. What this means is that prices aren’t increasing as fast as expected, which often leads policymakers to consider loosening monetary policy, or at least not tightening it further. Traders responded quickly, pushing the pound higher against the dollar due to a growing belief that the Federal Reserve might not need to maintain higher interest rates for as long.
Fed Rate Path Expectations
From our view, expectations around the Fed’s rate path have softened. Initially, three rate cuts were anticipated, but the market has now priced in just two. These shifts are not trivial—they speak directly to sentiment in fixed income and swap markets that ripple through to the dollar. A gentler trajectory in interest rate policy tends to weigh on the currency, and that’s what we saw here.
On the UK side, fresh jobs numbers released this week hinted at easing labour market pressure. Fewer people were on payrolls and growth in average pay cooled again. These two signals imply that the Bank of England has more space to consider easing policy down the road. There’s now roughly 48.6 basis points of rate reductions priced in through to year-end. Practically, this amounts to two quarter-point cuts being viewed as likely, although we aren’t expecting a move in June based on current data.
The pound-dollar pair, while still trading within an upward channel on wider timeframes, has drifted below its 20-day moving average. That said, it hasn’t broken through support seen earlier in the week. For us, that confluence creates a pivotal chart area right around 1.3194 to 1.3226. If that zone holds, then price action could find traction to push back toward key resistance zones—namely, the 20-day moving average and the clusters just above at 1.3350 and 1.3400.
So, from a trading stance, what we’re watching over the next few sessions is how the dollar reacts to further data releases. If upcoming US figures continue to underwhelm, then we may see momentum further tilt in favour of sterling, especially if UK inflation surprises higher or the BoE tone shifts at all. We’re not positioning for quick reversals unless the next figures from the States flip this benign inflation outlook on its head.
It also helps to treat these SMA levels not as fixed targets but rather as zones where dealer flow and short-term options strike levels sit. Intraday traders might be tempted to fade moves at those resistance levels, while longer-term positioning would likely favour building gradually into swings that lean toward 1.3400, should support remain intact.
In practical terms, we think it pays to keep a close eye on volatility gauges around this pair in the coming week. If you start seeing implied volatility firm despite no fresh headlines, that’s usually your signal that positioning is beginning to become one-sided. Use that as a cue.
And finally, with both central banks unlikely to announce dramatic shifts before the next round of inflation and growth data, this opens the door for technicals to temporarily gain more influence. That context offers opportunity for traders who are disciplined with their entries and keep tight risk parameters.
