GBPUSD sell-off targets 1.3345

The GBPUSD pair is now largely driven by significant divergences in market expectations regarding the two regulators’ monetary paths.

Let’s start with the Bank of England (BoE). Previously, traders predicted that British officials would keep elevated borrowing costs longer than any other G7 country because of stubbornly high inflation in the services sector. However, investors have recently changed their tune. Whispers of a rate cut as early as August or September are now growing louder. April’s decline in the Consumer Price Index (CPI) to 2.8% was the catalyst for such a shift. 

Despite the slower pace of inflation, UK GDP growth remains quite steady, offering the BoE some room to maneuver: there is no rush to ease monetary conditions, yet the central bank is becoming less hawkish. 

Another important factor to consider is the energy market. Brent crude is now trading within the $85–$86 range. If oil prices climb above $90, the BoE may change its plans once again, reviving talks of a rate hike to 5.25% in order to offset the negative effects of inflation spikes.

Across the Atlantic, the hawkish Federal Reserve—now under Kevin Warsh—supports the greenback. The Dollar Index (DXY) is climbing higher in this environment. Traders view Warsh’s appointment as a sign of a “higher for longer” scenario, as he is known for his tough stance on elevated inflation.

This week, the market is eagerly awaiting the US Personal Consumption Expenditures (PCE) report. If these readings come in above forecasts, any lingering hopes for rate cuts in 2026 will be completely crushed—dealing another blow to the pound.

Given higher American Treasury yields, investment flows are likely to flee the UK currency in favor of the dollar.

The overall recommendation is to sell GBPUSD. Profits should be taken at 1.3345. Stop Loss could be set at 1.3530.

Always size the position so that your potential loss (protected by a Stop Loss order) 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.