GBP/USD shows resilience around 1.3510 during the Asian session on Tuesday. The anticipation of a gradual monetary easing path by the BoE in 2026 bolsters the Pound Sterling. The initial resistance level is identified at 1.3550, while the primary support level to monitor is at 1.3410. The GBP/USD pair is experiencing slight upward movement, currently positioned at 1.3510 in the early European session on Tuesday. The Pound Sterling is gaining strength against the US Dollar as the Bank of England indicated that monetary policy will continue on a gradual downward trajectory.
The UK central bank reduced its benchmark interest rate by 25 basis points to 3.75% during its December meeting. During the press conference, Governor Andrew Bailey indicated that rates are expected to follow a gradual downward trajectory, but “how much further we go becomes a closer call” with each reduction. Market participants anticipate that the Bank of England will implement at least one rate reduction in the first half of the year, with nearly a 50% likelihood of a second cut occurring before the year’s conclusion, as reported. Market participants are factoring in the likelihood of additional rate cuts by the Federal Reserve in 2026, subsequent to a quarter-point decrease announced during the December meeting. The Minutes from the Federal Open Market Committee are set to be released later on Tuesday. Anticipations indicate that trading volumes will likely stay subdued as the New Year holidays approach.
In the daily chart, GBP/USD remains firmly above the ascending 100-day EMA at 1.3335, maintaining a positive outlook. It continues to stay above the 20-day average, highlighting trend support. RSI (14) is currently at 69.87, approaching overbought territory. The immediate advance is capped by the upper Bollinger Band at 1.3550. A daily close above that barrier would further the ascent, while the sentiment remains positive above the EMA.
Bollinger Bands have contracted slightly as the price remains just below the upper band, indicating a decrease in volatility while buying pressure continues to be strong. Initial support is positioned at the 20-day middle band, currently at 1.3410, with subsequent support at the lower band, which stands at 1.3270. A retreat into the mid-band would attract buyers, whereas a drop below could reveal the lower boundary and hinder the momentum of the uptrend.