The GBP\/USD regained positive traction, reversing a downward trend at the start of the week as the US Dollar faced broad selling. Concerns over the US Federal Reserve’s independence weakened the USD, despite geopolitical tensions and a global flight to safety.<\/p>\n
The pair finds buyers near the 200-day Simple Moving Average, recovering from a near three-week low. Spot prices rose to around the 1.3435 mark, a 0.20% increase for the day, snapping a four-day losing streak.<\/p>\n
Despite reduced expectations for aggressive US Federal Reserve policy easing, USD weakness persists amid concerns for Fed independence, affecting GBP\/USD positively. Recently, the USD Index had slid from its high ahead of December\u2019s Nonfarm Payrolls report, which saw only 50K jobs added, against expectations, despite an unemployment rate drop to 4.4%.<\/p>\n
Potential rate cuts by the Bank of England in 2026 may limit GBP\/USD gains. Traders await US inflation figures and UK GDP data later in the week for more decisive market directions. The USD demonstrated varied performance against other currencies, notably being strongest against the Japanese Yen.<\/p>\n
We are seeing the GBP\/USD pair find support near its 200-day moving average, a technically important level, after a four-day slide. The current rebound towards the mid-1.3400s is being driven almost entirely by broad-based weakness in the US Dollar. This dollar sell-off is a direct reaction to the serious news regarding the Department of Justice threatening Fed Chair Powell, which strikes at the heart of the central bank’s independence.<\/p>\n
This political turmoil surrounding the Fed introduces significant uncertainty, which is a key factor for volatility traders. The Dollar Index (DXY) has now fallen from last Friday’s high of over 104.50 to its current level around 103.20, reflecting the market’s unease. With this backdrop, we can expect implied volatility on major dollar pairs to rise, making long volatility strategies like straddles on USD\/JPY or strangles on EUR\/USD potentially attractive ways to trade the expected price swings.<\/p>\n
This situation has historical echoes, reminding us of the political pressure the Fed faced back in 2018 and 2019, which led to notable market choppiness. In that period, concerns about the Fed caving to political demands caused significant swings in treasury yields and the dollar. The current threat of a criminal indictment is a more severe escalation, suggesting the potential for an even more volatile market reaction in the weeks ahead.<\/p>\n
On the other side of the pair, however, the British Pound has its own headwinds which should cap this rally. With the latest data from late 2025 showing UK inflation cooling to 2.8% and quarterly GDP growth at a sluggish 0.1%, the market is correctly pricing in at least two interest rate cuts from the Bank of England this year. This monetary policy divergence will likely prevent GBP\/USD from staging a sustained breakout above the 1.3600 resistance level.<\/p>\n
Therefore, the immediate focus must be on this week’s key data releases, particularly the US inflation reports on Tuesday and Wednesday. A higher-than-expected US CPI print could complicate the narrative and renew dollar strength, while a soft number would amplify the current trend. Given the capped upside for the Pound, traders might consider buying GBP\/USD call spreads, such as buying a 1.3500 call and selling a 1.3650 call, to profit from a limited move higher while defining risk.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD rebounds as USD weakens on Fed independence concerns; traders await key US and UK data.<\/p>\n","protected":false},"author":62,"featured_media":17031,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38793","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/38793","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=38793"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/38793\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/17031"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=38793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=38793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=38793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}