GBP/USD shows strength, reaching approximately 1.3470 during the early European session on Tuesday. Renewed concerns regarding the Fed’s independence are putting pressure on the US Dollar in comparison to the Cable. Market participants are looking forward to the release of the US December CPI inflation data on Tuesday for new momentum. The GBP/USD pair moves upward, approaching 1.3470 in the early European session on Tuesday. The Greenback is experiencing a decline against the Pound Sterling in the wake of the US Department of Justice’s warning regarding a potential indictment of Federal Reserve Chair Jerome Powell due to his remarks to Congress concerning a building renovation project.
On Sunday, Powell stated that the Fed has been served subpoenas by the Justice Department regarding comments he made to Congress last summer concerning cost overruns for a $2.5 billion renovation project at the central bank’s headquarters in Washington. He referred to the threats as a “pretext” for exerting pressure on the Fed to reduce interest rates. This headline brings to light issues regarding the Fed’s independence, leading to some selling pressure on the US Dollar and providing support for the major pair.
The Bank of England reduced its interest rate to 3.75% during the December policy meeting and is anticipated to make additional cuts in 2026 as inflation subsides and the UK labor market continues to show weakness. However, officials indicate that future decisions will be “closer calls.” A dovish stance from the BoE may exert downward pressure on the Cable relative to the USD. Numerous experts anticipate that the UK central bank will maintain its current rates in February, with the next 0.25% reduction expected to take place in March or April of this year.
Market participants will closely monitor the upcoming release of the US December Consumer Price Index inflation data, scheduled for later on Tuesday. The headline and core US CPI are anticipated to demonstrate a rise of 2.7% year-over-year in December. These figures may provide insights regarding the trajectory of US interest rates.