GBP/USD is attracting some buyers to around 1.3430 during early European trading hours on Monday. The US dollar weakens against the pound after Federal Reserve Chairman Jerome Powell said US President Donald Trump threatened to file a criminal indictment against him, raising concerns about the independence of the central bank.
The U.S. Department of Justice sent the agency subpoenas and threatened criminal indictment over testimony he gave before a Senate committee about the renovation of the Federal Reserve Bank buildings. Powell called the investigation “unprecedented” and said he believed it was opened because he had angered Trump over his refusal to cut interest rates despite repeated public pressure from the president.
“This open war between the Fed and the US administration… is clearly not a good outlook for the US dollar,” said Ray Attrill, head of currency strategy at National Australia Bank.
Traders will be watching UK jobs data closely later on Tuesday, as it could provide some hints about the market’s expectations for the Bank of England’s monetary policy outlook. If reports show weaker than expected results, this could impact the pound in the near term.
Technical analysis:
On the daily chart, the 100-day moving average is rising and offering support at 1.3358, with the price staying above this longer-term average to maintain the broader bullish bias. The RSI at 51.90 is neutral and trending higher, indicating stabilization in momentum after the recent pullback. Continued above average stability could pave the way for a retest of 1.3458, keeping the recovery path intact.
The price is just below the middle Bollinger band at 1.3458, while the bands have narrowed, reflecting lower volatility and a consolidation phase. An RSI near 52 confirms a range-bound tone; A strong upward push will improve upward traction. A close above the midline could open a move towards the upper band at 1.3552, while weakness towards 1.3365 would put the lower band in play and risk a deeper pullback.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
Frequently asked questions about the pound sterling
The British Pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most popular foreign exchange (FX) trading unit in the world, accounting for 12% of all transactions, averaging $630 billion per day, according to data for 2022. The main trading pairs are GBP/USD, also known as “Cable”, which accounts for 11% of FX, GBP/JPY, or “Dragon” as traders know it (3%), and EUR/GBP (2%). The pound sterling is issued by the Bank of England (BoE).
The single most important factor affecting the value of the pound sterling is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on whether it has achieved its primary objective of “price stability” – a stable inflation rate of around 2%. The primary tool for achieving this is adjusting interest rates. When inflation is too high, the Bank of England will try to rein it in by raising interest rates, making it more expensive for individuals and businesses to obtain credit. This is generally positive for the pound, as higher interest rates make the UK a more attractive place for global investors to put their money. When inflation falls to a very low level, it is a sign that economic growth is slowing. In this scenario, the Bank of England would consider lowering interest rates to reduce the cost of credit so that companies borrow more to invest in growth-generating projects.
Data releases measure the health of the economy and can affect the value of the British pound. Indicators such as GDP, manufacturing PMIs, services and employment can all influence the direction of the pound. A strong economy is good for the pound. Not only does it attract more foreign investment, but it may encourage the Bank of England to raise interest rates, which will directly strengthen sterling. Otherwise, if economic data is weak, the British pound is likely to fall.
Another important data release for the British Pound is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a certain period. If a country produces highly sought-after exports, its currency will take full advantage of the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
