GBP/USD Holds $1.35 as 25bp BoE Cut Fuels Bullish Breakout Setup
The British pound is holding steady around $1.3510 during the European session, building on modest gains against the US dollar...
Quick overview
- The British pound is steady around $1.3510 as investors digest the Bank of England's cautious rate cut guidance.
- BoE Governor Andrew Bailey indicated that future rate cuts will be slow and data-dependent, easing market concerns about a UK economic slowdown.
- The US dollar remains under pressure as traders anticipate the FOMC meeting minutes, with speculation of further rate cuts in 2026.
- GBP/USD is consolidating around $1.3500, with key technical levels indicating potential for a breakout above $1.3535.
The British pound is holding steady around $1.3510 during the European session, building on modest gains against the US dollar as investors try to wrap their heads around the latest guidance from the Bank of England. Although the BoE did go ahead and cut rates by 25 basis points to 3.75% back in December, officials went out of their way to temper expectations of aggressive easing coming down the pipe.
BoE Governor Andrew Bailey made it clear that any future rate cuts would be pretty slow and data-dependent, which has helped soothe market nerves about a sharp slowdown in the UK economy. As a result, traders now think there’s a pretty good chance we’ll see another cut in the first half of the year – with a 50% probability of a second move by year-end. That cautious stance has actually helped the pound outperform its peers, even as the possibility of further rate cuts remains on the table.
Fed Rate Expectations Weighing on Dollar Strength
Over in the States, the US dollar is still getting a bit of a soft time as markets look ahead to the FOMC meeting minutes, due out later today. The Federal Reserve’s rate cut in December has kept speculation alive that we might see more easing in 2026 – especially if inflation keeps cooling and labour market conditions start to soften.
While Fed officials have been pretty coy about committing to a clear timeline, traders are still quite sensitive to any hints of a softer policy path. Trading is also pretty thin right now ahead of the New Year holidays, which is limiting volatility – and keeping GBP/USD stuck in a pretty narrow range despite the shifting rate expectations.
GBP/USD Technical Picture Still Looks Constructive
From a technical perspective, GBP/USD is just sort of consolidating around $1.3500 on the 4-hour chart after that strong rally from the late-November lows. The recent candlesticks show smaller bodies with mixed wicks, suggesting the momentum is slowing rather than any renewed selling pressure.
The price is still trading within a rising channel, and is being supported by an upward-sloping trendline that has been guiding the move higher for a few weeks now.
Key technical levels to keep an eye on:
- 50-EMA support: around $1.3455
- 200-EMA support: about $1.3405
- Horizontal support: $1.3470, then $1.3400
- Immediate resistance: $1.3535
- Next upside target: $1.3600
The RSI is still near 55, suggesting the momentum is still pretty mild without getting stretched out of control. While no clear triangle breakout has formed yet, the tightening price action near resistance suggests a directional move might be around the corner once volume picks up.
What Traders Are Watching Out For Next
Given that UK policy guidance is helping stabilize sterling and US rate expectations are putting pressure on the dollar, GBP/USD remains highly sensitive to any incoming signals from central banks.
- BoE messaging on growth and inflation
- FOMC minutes for any clues on 2026 rates
- Breakout behaviour above $1.3535
Trade idea: If we get a confirmed break above $1.3535, then we’re looking to buy up to $1.3600, with a stop-loss below $1.3470.
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