GBP/USD opened near 1.3300, fell through Thursday, and closed around 1.3220, down 0.65%. Price remains below the 50-day EMA near 1.3400 and the 200-day EMA around 1.3360, while the Stochastic RSI is 73.
The March low near 1.3080 is the next nearby level, set in mid-March 2026. There is limited support between current levels and 1.3080.
Bank Of England Pricing And Energy Shock
In February, markets priced at least two Bank of England rate cuts for 2026, with March seen as likely. The Bank Rate is 3.75% after 150 basis points of cuts since August 2024, and inflation was moving towards the 2% target.
After the Strait of Hormuz closed and oil rose above $100, swap pricing shifted to as many as four rate hikes by mid-March. That has moved to around two, while BoE staff project CPI inflation at 3.5% by Q3 2026 versus about 2% before the war.
The UK imports about 40% of its oil and up to 60% of its natural gas. Ofgem’s price cap applies until July, after which higher wholesale costs may feed into bills.
GBP/USD had ranged between 1.3200 and 1.3450 for most of March, but it closed more than 100 pips below the 200-day EMA. The 2026 range shows a January high of 1.3870 and a March low near 1.3080, with 1.2950-1.3000 next below.
US Nonfarm Payrolls are due Friday at 12:30 GMT, with consensus at +57K after -92K in February. Jobless claims were 202K, and Good Friday closures may reduce liquidity in Dollar pairs.
Trade Implementation And Risk Events
The British Pound’s recent breakdown below the 200-day moving average suggests the path of least resistance is lower. With the currency trading around 1.3220, our focus shifts to the year’s low near 1.3080 as the next logical target. This technical damage indicates that selling pressure is likely to continue in the coming weeks.
The market’s dramatic shift from expecting rate cuts to pricing in hikes highlights the UK’s vulnerability to the energy shock. The latest data from the Office for National Statistics showed UK producer price inflation (PPI) for February 2026 surged by 1.2% month-over-month, suggesting consumer price hikes are imminent. This puts the Bank of England in a difficult position, as raising rates could severely damage an already fragile economy.
Given this outlook, we are looking at buying put options to position for a further slide in GBP/USD. Options expiring in late April or May 2026 with strike prices around 1.3100 or 1.3000 could offer a favorable risk-reward profile. This strategy allows us to capitalize on a move toward or through the March lows while defining our maximum risk.
For a more cost-effective approach, we consider using bear put spreads, such as buying a 1.3150 put and selling a 1.3050 put. This strategy lowers the initial cost but also caps potential profit, making it suitable for a measured move lower. With Brent crude futures consistently closing above $105 per barrel for the past three weeks, a level not sustained since the energy crisis of 2022, the inflationary pressures underpinning this trade are not abating.
We must also watch today’s US Nonfarm Payrolls report, as a strong number would likely strengthen the dollar and accelerate the Pound’s decline. The recent Atlanta Fed GDPNow model was revised upwards to 2.1% for Q1 2026, reinforcing the view of a resilient US economy. A solid jobs print today would further highlight the policy divergence between the Fed and the struggling Bank of England.
The combination of the NFP release and the Good Friday holiday means liquidity will be thin, potentially leading to exaggerated price moves. Implied volatility on GBP/USD options has risen to a six-week high of 9.8%, reflecting the market’s nervousness ahead of the data. This elevated volatility makes option selling strategies riskier, reinforcing the case for defined-risk positions like buying puts or put spreads.
