The GBP/USD pair continued its upward momentum on Wednesday, rising toward 1.3525 during the early European trading hours. A positive risk appetite in global markets is fueling demand for risk-sensitive currencies like the British Pound, helping it strengthen against the US Dollar.
Investor focus is now shifting to Thursday’s release of the UK’s preliminary PMI figures, which could provide fresh insight into the health of the British economy.
Meanwhile, uncertainty surrounding US tariff policies and concerns over the Federal Reserve’s independence are putting pressure on the US Dollar. Markets remain cautious ahead of the expected implementation of tariffs on key US trading partners next month. While some investors believe President Trump might delay the move again, others remain wary of potential trade disruptions. Earlier this week, US Treasury Secretary Scott Bessent emphasized that the administration prioritizes the quality of trade agreements over their timing.
Concerns about political influence on the Fed have also emerged. President Trump has repeatedly criticized Fed Chair Jerome Powell for not cutting interest rates and even suggested he should resign. In response, Fed Vice Chair Michelle Bowman defended the institution’s autonomy, stating that independence in setting monetary policy is “very important.”
Despite the Pound’s recent strength, risks remain on the UK side. Ongoing political uncertainty, fiscal challenges, and signs of a softening labor market continue to weigh on the outlook. Market expectations point toward two interest rate cuts by the Bank of England before year-end, potentially bringing the base rate down to 3.75%, which could limit further gains for the Pound against the Dollar.
