The GBP/USD pair trades with modest gains near the 1.3510 area during the early European session on Tuesday, as the Pound Sterling strengthens against the US Dollar. The move comes after the Bank of England reinforced guidance that monetary policy easing will proceed on a gradual path.
At its December meeting, the BoE lowered its benchmark interest rate by 25 basis points to 3.75%. Speaking at the press conference, Governor Andrew Bailey said rates are likely to continue edging lower, though each additional cut will be a “closer call.” According to Reuters, money markets expect at least one rate cut in the first half of the year and are pricing in nearly a 50% probability of a second cut before year-end.
On the US side, traders continue to factor in the prospect of further policy easing by the Federal Reserve in 2026, following a quarter-point rate cut delivered in December. Attention later on Tuesday will turn to the release of the Federal Open Market Committee (FOMC) Minutes, which could provide additional insight into the Fed’s outlook. Trading conditions are expected to remain subdued ahead of the New Year holidays.
GBP/USD technical analysis
From a technical perspective, GBP/USD maintains a constructive tone on the daily chart. The pair is holding comfortably above the rising 100-day Exponential Moving Average (EMA) at 1.3335, preserving the broader bullish structure. Prices also remain above the 20-day moving average, highlighting near-term trend support.
Momentum indicators point to strong buying interest. The 14-day Relative Strength Index (RSI) stands near 69.9, approaching overbought territory. The upper Bollinger Band near 1.3550 acts as the first significant upside barrier. A daily close above this level would likely extend the rally, with the bullish bias intact as long as the pair stays above its key EMAs.
Bollinger Bands have narrowed slightly, suggesting reduced volatility even as price action holds just below the upper band. Initial support is seen at the 20-day mid-band around 1.3410, followed by the lower band near 1.3270. A pullback toward the middle band could attract fresh buyers, while a deeper move lower would risk exposing the lower boundary and slowing the current upward momentum.
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