GBP/USD pulls back in Asian trading on Wednesday, hovering near 1.3450 after giving up part of the previous session’s gains. Despite the dip, the Pound Sterling (GBP) retains underlying support as fading expectations for further Bank of England (BoE) rate cuts help cushion downside pressure.
UK inflation has been climbing at a faster pace in recent months, reducing the likelihood of aggressive policy easing. On Tuesday, BoE Monetary Policy Committee (MPC) member Catherine Mann argued for holding the Bank Rate steady to counter inflation risks. She also noted that she would support “forceful policy action” in the form of larger, quicker cuts if downside risks to domestic demand become more evident.
Dollar Rebound Limits GBP/USD
The US Dollar (USD) is recovering from its recent losses, weighing on GBP/USD. However, the Greenback’s upside remains capped as markets assess rising concerns over the Federal Reserve’s independence and the potential for a more dovish stance.
In a historic move, US President Donald Trump announced on Tuesday that Fed Governor Lisa Cook had been removed from the board, marking the first time in the central bank’s 111-year history that a president has dismissed a sitting governor. Trump cited allegations of falsified mortgage documents and signaled readiness for a legal battle.
Cook’s removal may accelerate the timeline for Fed rate cuts, with traders increasingly pricing in policy easing. According to the CME FedWatch tool, markets now assign an 87% probability of at least a 25-basis-point cut in September, up from 84% a day earlier.
Outlook: GBP/USD faces near-term downside from Dollar strength but could find support if UK inflation worries keep BoE policymakers cautious on rate cuts.
