- GBP/USD declines as traders reduce risk following allegations against Fed Governor Cook regarding mortgage fraud.
- Trump contemplates firing Governor Cook, creating uncertainty about monetary policy and impacting the dollar’s performance.
- The UK Consumer Price Index (CPI) climbs to 3.8% year-on-year. 5% Trim BOE Rate Service CPI lowers 2025 forecasts.
During the North American trading session, GBP/USD dropped as traders seemed to disregard the high inflation in the UK, particularly concerning Governor Lisa Cook. The pair faced a decrease of 0.15%, hitting 1.3469.
Sterling weakens despite rising UK CPI amid Fed’s political turmoil affecting investor confidence
Reports surfaced earlier indicating that Federal Reserve Governor Lisa Cook had allegedly misrepresented information related to the mortgage sector, with accusations from Bill Prute, the director of the Federal Housing and Treasury Agency (FHFA). Bloomberg quoted him as saying, “Cook might have manipulated bank documents and property sales records to secure more favorable loan conditions, constituting mortgage fraud under criminal law.”
According to sources from the Wall Street Journal, Trump is mulling over the decision to dismiss Fed Governor Cook in light of the fraud allegations.
This situation prompted traders to seek safer investments, leading to sales of GBP/USD which initially tested the 1.3500 mark following UK economic data releases.
In the UK, the inflation rate surged in July, as noted by the National Statistics Office (ONS). The Consumer Price Index (CPI) escalated by 3.8%, up from 3.6%. Core CPI matched this year-on-year increase of 3.8%, with service CPI reaching 5%.
This data pressured the Bank of England (BOE), which recently lowered rates to 4% after a 5-4 vote. Projections for the central bank’s rate dropped to 3.6% by December 2025 and 2.5% in 2026, aiming for a return to 2% by the mid-2027.
Consequently, market participants reduced the likelihood of further rate cuts by the BOE for the rest of the year. Following this data, the probability of a rate reduction in December decreased from 50% to 42%.
Next, the US Economic Docket will reveal the minutes from the Federal Reserve’s past meetings ahead of Thursday’s employment data and feature a speech from Chairman Jerome Powell at Jackson Hole.
GBP/USD price outlook: Technical analysis
The decline continued after the UK inflation report reached 1.3500. However, concerns over FRED independence led to profit-taking, causing GBP/USD to retract towards the 1.3450 region, crossing below the 50-day Simple Moving Average (SMA) which sits at 1.3495.
The relative strength index (RSI) still indicates a bullish trend, though its angle suggests it might soon hit neutral territory, hinting at potential short-term setbacks.
If GBP/USD dips below 1.3450, sellers may drive the exchange rate down to the 20-day SMA at 1.3409, followed by the 100-day SMA at 1.3403. Conversely, if the pair rises past 1.3500, buyers might target the August 14 high of 1.3594, with 1.3600 as a subsequent goal.
The accompanying table shows the performance of the British pound against major currencies this week, highlighting its strength against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.45% | 0.61% | -0.06% | 0.33% | 1.17% | 1.60% | -0.16% | |
| EUR | -0.45% | 0.16% | -0.50% | -0.08% | 0.73% | 1.11% | -0.61% | |
| GBP | -0.61% | -0.16% | -0.75% | -0.28% | 0.57% | 0.95% | -0.81% | |
| JPY | 0.06% | 0.50% | 0.75% | 0.40% | 1.24% | 1.67% | -0.11% | |
| CAD | -0.33% | 0.08% | 0.28% | -0.40% | 0.81% | 1.26% | -0.53% | |
| AUD | -1.17% | -0.73% | -0.57% | -1.24% | -0.81% | 0.37% | -1.37% | |
| NZD | -1.60% | -1.11% | -0.95% | -1.67% | -1.26% | -0.37% | -1.76% | |
| CHF | 0.16% | 0.61% | 0.81% | 0.11% | 0.53% | 1.37% | 1.76% |
The table highlights the British pound’s weekly performance against major currencies, notably showing its strength against the New Zealand Dollar.
