The British Pound (GBP) experienced a significant rebound on Monday as concerns surrounding the independence of the US Federal Reserve (Fed) led to a notable sell-off of the US Dollar (USD). The GBP/USD pair rose by 0.55%, trading at 1.3473 at the time of reporting, as traders reacted to heightened geopolitical tensions and shifts in monetary policy sentiment.
Market Reaction to Fed Statements
Recent comments made by Jerome Powell, Chair of the Federal Reserve, have intensified worries about potential political interference in US monetary policy. Over the weekend, Powell disclosed that the Fed had received grand jury subpoenas from the Justice Department, which he described as a threat of criminal indictment. He noted, “the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
As a result, the US Dollar weakened sharply, with the DXY Index, which measures the dollar’s value against six major currencies, falling by 0.35% to 98.79. This decline reflects broader market concerns about the Fed’s ability to operate independently amidst political pressures.
Despite US President Donald Trump denying any involvement in the investigation, he has previously criticized Powell for not reducing interest rates to his liking. This ongoing tension has contributed to a climate of uncertainty surrounding US monetary policy.
Implications for the UK Economy
In the UK, analysts suggest that reduced fiscal and political risks may provide a supportive backdrop for the Pound. Following the budget presentation by Chancellor Rachel Reeves in November, sentiment towards the UK economy has improved. Market participants are now keenly awaiting the release of the UK’s Gross Domestic Product data on Thursday and upcoming employment figures next week, which could offer insights into the Bank of England’s (BoE) future policy direction.
The rebound of the GBP is not only attributed to US developments but also to the anticipation of positive economic data from the UK. As the pound gains momentum, technical indicators show that GBP/USD could test higher resistance levels. The pair recently reached a three-day high of 1.3485, supported by a bullish Relative Strength Index.
If GBP/USD breaks through the significant resistance level of 1.3500, it could pave the way towards a yearly high of 1.3567. Conversely, a drop below 1.3400 may expose the pair to further declines, potentially testing the 200-day Simple Moving Average (SMA) at 1.3386.
This week, the British Pound has notably outperformed other major currencies, reflecting its strength against the US Dollar. The following table summarizes the percentage changes of the British Pound against several key currencies:
| Currency | Change |
| USD | -0.42% |
| EUR | 0.42% |
| JPY | 0.14% |
| CAD | 0.30% |
| AUD | 0.56% |
| NZD | 0.60% |
| CHF | 0.60% |
The current dynamics in the foreign exchange market illustrate the complex interplay between geopolitical developments, economic data, and monetary policy. As traders navigate these challenges, the focus will remain on forthcoming economic indicators that could shape future currency movements.
