Monetary policy divergence issue is now weighing on the GBPUSD pair, as the Bank of England (BoE) is expected to cut interest rates, while the US Federal Reserve’s (Fed) stance remains unchanged.
At the previous BoE meeting on February 5, 2026, officials kept borrowing costs at the same 3.75% level. However, the decision was far from unanimous, with four members voting to reduce rates to 3.5% and five insisting on a pause. In March, the regulator is projected to ease monetary policy with a 71% probability.
On the other side of the Atlantic, the Fed continues to hold borrowing costs in the 3.50%–3.75% range following a halt in January. Despite delivering three cuts by the end of 2025, the US central bank has adopted a more reserved stance due to resilient inflation and strong employment data.
In the UK, the Consumer Price Index (CPI) is approaching the target range at a faster pace than in America, allowing the BoE to act more dovish. Last month, inflation plummeted to 3.0% from 3.4% in December. With such results, CPI readings could reach the desired 2% as early as this spring.
As for the US, consumer prices appear to be stuck at 2.4%, which is better than in the UK but still above the Fed’s 2% objective. The 2026 outlook is forcing the regulator to think twice before continuing its easing cycle.
Now, let’s talk about employment. A deteriorating UK labor market was a key factor behind the pound's weakness in February. The ILO unemployment rate suddenly spiked to 5.2%—the highest level in a decade (excluding the pandemic period). Wage growth, on the contrary, fell to 4.2%. These data reduce inflation risks and strengthen the case for a BoE rate cut.
The picture in the US is quite different. The labor market is stabilizing, with unemployment figures holding at a comfortable 4.4%. As a result, the Fed faces no immediate pressure to adjust monetary policy and is likely to keep rates in the current range for a while.
The combination of these factors continues to make things difficult for the pair.
The overall recommendation is to sell GBPUSD. Profits should be taken at 1.3445. Stop Loss could be set at 1.3525.
Always size the position so that your potential loss (protected by a Stop Loss) is no more than 1% of your account balance. If you can't open a position that meets such a risk criterion, it's safer to skip this trade and wait for a better, lower-risk opportunity.
This content is for informational purposes only and is not intended to be investing advice.
