The GBP/USD currency pair recently experienced a modest decline as the US dollar regained some strength amid cautious market sentiment. Despite this adjustment, the dollar’s recovery remains limited due to ongoing concerns surrounding the Federal Reserve’s independence and conflicting expectations about potential interest rate cuts. The divergence in monetary policy outlooks between the Federal Reserve and the Bank of England has helped to prevent a sharper slide in the pound, with spot prices still hovering near recent lows.
Market participants are reacting to positive news that a bipartisan agreement has been reached to temporarily fund the U.S. federal government. This development helped the USD index strengthen, moving away from a four-year low recorded earlier in the week. However, overall sentiment remains fragile, as the dollar continues to face pressures stemming from political uncertainties and economic policy risks linked to U.S. domestic politics, including recent comments questioning the Federal Reserve’s actions and the possibility of further rate cuts in the near future.
Adding to geopolitical tensions, President Donald Trump announced intentions to impose tariffs on Canadian aircraft, citing unfair certification practices, and threatened tariffs on oil imports from countries supplying Cuba. Trump also criticized Federal Reserve Chair Jerome Powell, calling for significant rate reductions. Reports indicate that a potential nomination of Kevin Warsh to succeed Powell as Fed Chair is under consideration, which could influence monetary policy and market stability moving forward.
Investors continue to weigh the likelihood of additional Fed rate cuts, with market pricing suggesting the possibility of two more reductions by 2026. This outlook, combined with political developments, keeps the US dollar’s gains restrained.
From a technical perspective, the GBP/USD pair maintains a cautious, consolidative stance. The 100-hour simple moving average supports the current price, and momentum indicators reflect subdued activity, with the RSI remaining below the midline. Key Fibonacci retracement levels around 1.3747 and 1.3670 are seen as important support zones. A decisive move below these levels could signal deeper corrections, while support above them may suggest stabilization ahead of a potential rebound.
