GBP/USD is currently positioned between 1.3470 and 1.3485, reflecting an increase of approximately 0.5 to 0.6% for the day, following a significant rebound from a near three-week low slightly above 1.3400. The pair has turned directly on the 200-day moving average cluster at 1.3380–1.3400 and moved back into the mid-1.34s, reversing a four-session losing streak. The recent bounce is not coincidental: the 1.3380–1.3400 range continues to serve as the main structural support for GBP/USD, and a decisive move below this level would lead to a potential decline towards approximately 1.3200. Instead, purchasers intervened precisely at the necessary moment, transforming a breakdown effort into an upward squeeze.
The recent upward movement in GBP/USD is primarily influenced by the weakening of the USD due to the Fed independence narrative, rather than any significant outperformance from the UK. The Dollar Index has declined from above 104.50 late last week to below 99.00, with DXY quoted around 98.8 as “Sell America” flows return to G10 FX. Jerome Powell’s statement serves as a pivotal moment, indicating that the Federal Reserve has received grand jury subpoenas from the Department of Justice. This development raises the possibility of a criminal indictment if the bank persists in determining rates solely based on economic factors instead of aligning with presidential preferences. The implications are clear: the US central bank is facing significant political scrutiny. Previously, when the emphasis was solely on macroeconomic factors, the dollar maintained its strength despite weaker figures.
Nonfarm payrolls reported an increase of only 50,000 jobs, falling short of the 65,000 consensus, while the unemployment rate stood at 4.4%. Despite this, the USD showed strength throughout the day, and GBP/USD continued to face challenges. It was only when institutional risk emerged – due to the Fed investigation and public pressure – that the dollar weakened universally, allowing GBP/USD to gain momentum. From the perspective of the British economy, the fundamentals do not indicate a strong bullish trend; rather, they are sufficiently stable to maintain the pound’s attractiveness for investment, especially as the US grapples with its own challenges. Recent data from late 2025 indicates that the UK Consumer Price Index has moderated to approximately 2.8%, while quarterly Gross Domestic Product remains marginally positive at 0.1%. The interplay of inflation nearing its target alongside stagnant growth is precisely the rationale behind the market’s anticipation of at least two cuts from the Bank of England in 2026. November’s budget from Chancellor Rachel Reeves contributed to a decrease in fiscal and political risk, which in turn reduced some risk premium associated with GBP. However, it did not alter the fundamental situation: the economy remains characterized by low growth and moderate inflation.
Purchasing GBP isn’t driven by exceptional macroeconomic conditions; rather, it’s a strategic move when the opposing currency is undermining its own position. The expectations for a BoE cut serve as a ceiling, preventing GBP/USD from transforming a relief rally into a sustained trend. Given that the UK is currently valued with expectations of easing, while the Fed is only cautiously moving towards lower rates, any rise into the high-1.35s will encounter selling pressure. Despite the recent developments concerning the Fed, the price movement of GBP/USD continues to exhibit characteristics of a range-bound trade. The lower band is supported by the 200-day moving average, presently situated around 1.3380–1.3400, which has effectively mitigated the recent decline. A decisive daily close beneath that band paves the way back toward 1.3200, the next clear demand zone identified in previous sell-offs. On the upside, the market has consistently hovered around the 1.3500–1.3550 range for several months. The 50-day moving average is positioned around 1.3400, yet the significant area of contention lies at 1.3500, which serves as a psychological barrier, alongside the recent yearly high range of 1.3550–1.3567. All methods of entering that strip have diminished. Overall, GBP/USD has been oscillating for approximately seven months, ranging from a low of 1.32 to a high of around 1.36. This period has seen multiple strong rallies and abrupt reversals, yet it has not experienced a consistent directional breakout. Currently, the pair is transitioning from the lower segment of that range (1.32–1.34) to the upper segment (1.34–1.36), with 1.3380–1.3400 serving as the pivotal point.