The Pound Sterling (GBP) inched higher against the US Dollar (USD) on Tuesday, with the pair climbing near 1.3460 during the European trading session. The upside in the GBPUSD pair came as the US Dollar slipped in reaction to US President Donald Trump’s removal of Federal Reserve Governor Lisa Cook, a move that has sparked renewed concerns over the central bank’s independence.
Trump Removes Fed’s Lisa Cook, Dollar Feels the Pressure
On early Tuesday, President Trump announced via Truth.Social that Fed Governor Lisa Cook had been removed from her position, accusing her of making “false statements” on mortgage agreements. The unexpected decision raised eyebrows in financial circles, with analysts suggesting the firing signals a deeper push to align the Federal Reserve with Trump’s economic agenda.
Market strategists highlighted that the move undermines confidence in the Fed’s independence. Analysts at Capital.com told Reuters, “The concern is the intent of the Trump administration: it’s not to preserve Fed integrity, it’s to install Trump’s own people at the Fed.”
Despite Trump’s announcement, Cook’s attorneys issued a statement clarifying that she will continue to serve, asserting that the President has “no authority to do so” under current laws.
Fed Independence Concerns Hit USD Sentiment
This political intervention has shaken investor confidence, pressuring the US Dollar across the board. According to the FXStreet currency heat map, the USD was weakest against the Japanese Yen, while also losing ground against the Euro and Pound Sterling. The market’s immediate reaction reflects fears that political interference could lead to policy decisions driven more by politics than macroeconomic fundamentals.
These developments add to recent tensions between Trump and the Fed. While Trump has frequently criticized the central bank in the past for not lowering rates fast enough, he had praised Fed Chair Jerome Powell just last week after Powell’s dovish guidance at the Jackson Hole Symposium, citing labor market risks and signaling that rate cuts remain on the table.
Pound Sterling Holds Firm Ahead of BoE Mann’s Speech
While US political drama pressured the Dollar, the Pound Sterling traded relatively steady ahead of a key speech by Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann. Scheduled for 16:00 GMT, her remarks are expected to provide crucial insights into the BoE’s monetary policy direction for the remainder of the year.
The UK’s economic backdrop remains challenging, with inflationary pressures showing persistence despite the BoE’s recent efforts to ease rates. Earlier this month, the central bank cut its key rate by 25 basis points to 4%, but the decision was narrowly supported, with policymakers like Mann advocating for a pause instead of immediate easing.
Markets will scrutinize her tone today to assess whether the BoE could consider holding rates steady to combat stubborn inflation, especially as recent economic data show price pressures accelerating faster than expected.
Upcoming Data: US PCE and Fed Rate Outlook
Looking ahead, attention will shift to the release of the Personal Consumption Expenditures (PCE) Price Index on Friday. As the Fed’s preferred inflation gauge, July’s PCE data could have a significant impact on rate expectations for the September meeting.
According to the CME FedWatch Tool, traders are currently pricing in an 84% probability of a rate cut next month. This sentiment gained momentum after the July Nonfarm Payrolls report showed downward revisions for May and June, indicating that the labor market is cooling faster than initially believed.
If PCE inflation comes in softer than expected, it could strengthen the case for an aggressive Fed rate cut, further weighing on the Dollar and potentially pushing GBPUSD higher.
Technical Outlook: GBPUSD Levels to Watch
From a technical perspective, GBPUSD’s recovery toward 1.3460 suggests buyers are regaining control.
Immediate resistance is seen near 1.3500, a psychological level that, if broken, could open the door to a stronger rally toward 1.3550.
On the downside, support lies at 1.3400, followed by 1.3350, where dip-buying interest could re-emerge.
The Relative Strength Index (RSI) remains neutral, indicating room for the pair to extend gains if upcoming events such as BoE Mann’s speech or weak PCE data favor the Pound.
Market Sentiment: Political Risk Meets Monetary Uncertainty
This week’s trading environment is defined by a combination of political risk in the US and monetary policy uncertainty in both the UK and the US.
For the US Dollar, Trump’s decision to remove a Fed official underscores the growing tension between the administration and the central bank, amplifying downside risks if investors view the Fed as less independent.
For the Pound, the next policy steps from the BoE will remain the primary driver, with traders balancing persistent inflation concerns against a fragile growth outlook.
Conclusion
The Pound Sterling’s modest climb against the Dollar on Tuesday highlights the market’s sensitivity to political developments in the US and upcoming policy signals in the UK. As traders await BoE Mann’s remarks and the critical US PCE inflation report, volatility in the GBPUSD pair is likely to remain elevated.
In the near term, political headlines and data surprises will shape direction. A dovish PCE print could accelerate USD weakness, while a hawkish tone from BoE policymakers could amplify Sterling gains, potentially pushing GBPUSD above the 1.3500 mark.
