The GBP/USD pair is showing a positive trend, trading around 1.3475 for the second day in a row. This comes as demand for the USD remains weak. Concerns about the US Federal Reserve’s independence and expectations of rate cuts from the Bank of England could limit potential gains. The USD is having a tough time attracting buyers due to fears surrounding the independence of the Federal Reserve. An ongoing investigation into Fed Chair Jerome Powell, whose actions reflect the central bank’s policies rather than presidential directives, adds to these worries.

USD Risks Amid Federal Reserve Investigation

Even with lowered expectations for aggressive easing by the Fed, the USD still faces limited downside risks. A drop in the US unemployment rate has eased some economic concerns, shifting attention to the upcoming US CPI data. Possible interest rate cuts by the Bank of England in 2026 may also restrict the GBP’s upward movement. Traders are anticipating the US Producer Price Index release and the UK GDP report for guidance on the currency pair’s direction. The Pound Sterling plays a significant role in foreign exchange, ranking as the fourth most traded currency. The Bank of England’s policy decisions and economic indicators like GDP and the Trade Balance heavily influence its value. FXStreet offers market news and forex tools but stresses the importance of thorough research before making investment decisions. The information shared, including the author’s opinions, is not personalized investment advice.

Market Expectations Ahead of Key Data Release

The GBP/USD pair remains steady at around 1.3475 as we await a major data release. This calm is expected to be short-lived, as traders look forward to the US inflation report out later today. A surprise in the Consumer Price Index could easily shift the market dynamics. The US dollar is under pressure due to unusual political scrutiny of the Federal Reserve. An active criminal investigation into the Fed Chair has increased perceived political risks, evident in the CBOE’s VIX index, which has risen to 15.2 from last week’s low. This uncertainty typically weighs down a currency, as global investors favor stability. However, the dollar isn’t collapsing thanks to the strong US job market. As of late 2025, the unemployment rate remained below 4%, giving the Fed little reason to implement aggressive rate cuts. This economic strength supports the dollar, resulting in a tug-of-war for the GBP/USD pair. On the GBP side, challenges persist. We’re expecting at least two interest rate cuts from the Bank of England this year, especially after UK inflation fell to 2.8% in the last quarter of 2025. The anticipation of lower rates in the UK is likely to limit how high the pound can climb against the dollar. For derivative traders, the current high-stakes environment suggests taking specific directional bets is risky. Instead, strategies like buying straddles or strangles in the options market may be wise approaches to profit from the expected volatility after today’s inflation report. This market feels different from recent years. While we dealt with inflation spikes in 2022 and 2023, the current political interference with the central bank is unusual and introduces a new kind of risk. This could lead to sharp, unpredictable moves in the weeks ahead as the market reacts to both economic data and political events. Create your live VT Markets account and start trading now.

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