Initially, the British pound (GBP) struggled against the US dollar (USD), starting around 1.3390. However, during European trading on Monday, it made a strong comeback, reaching about 1.3465. This rebound occurred as the US dollar experienced significant correction following news of a criminal investigation into Federal Reserve Chairman Jerome Powell regarding fund mismanagement related to the renovation of the Federal Reserve’s headquarters.
Currently, the US Dollar Index (DXY), which measures the dollar’s value against six major currencies, has dropped 0.3%, hovering around 98.80, after having approached a monthly high of 99.25 earlier.
Over the weekend, the U.S. Department of Justice issued a subpoena to the Federal Reserve regarding Powell, focusing on his statements made during June 2025 Senate testimony and his expenditure records.
In response, Powell remarked, “This new threat isn’t actually about the testimony or the renovation plans; it feels like a pretext.” He asserted that the implication of criminal charges stems from the Fed’s decision-making around interest rates based on public interest rather than presidential preferences.
Market analysts believe the looming criminal charges against Powell may heighten tensions between him and President Donald Trump, who has been vocal about his dissatisfaction regarding the Fed’s reluctance to lower interest rates since returning to office. This situation could pose risks to the Fed’s independence and potentially weaken the US dollar.
Daily Digest Market Movers: Fed’s Bostic Cautions on Inflation Risks
- The forthcoming UK jobs report for the three months ending in November is expected to impact the pound, with investors keenly observing labor market data for insights into the Bank of England’s monetary policy.
- Concerns about the UK labor market are substantial in 2025, as businesses are hesitant to hire due to increasing employer contributions to social security.
- On the same day, a report from the Recruitment and Employment Confederation (REC) and KPMG highlighted that, despite weak labor demand, wage growth saw an uptick in December.
- In the U.S., the December nonfarm payrolls report indicated that the unemployment rate fell to 4.4% from 4.6% in November, although employment figures were estimated at 60,000, which is lower than the anticipated 56,000.
- Looking ahead, Tuesday’s Consumer Price Index (CPI) report is anticipated to be a key determinant for the USD, as inflation data could influence interest rate expectations.
- The Fed had reduced interest rates by 25 basis points three times in 2025 to mitigate labor market challenges, despite inflation remaining above the 2% target for an extended period.
- On Friday, Atlanta Fed President Rafael Bostic expressed in an interview that inflation is excessively high and needs to be addressed by the Fed.
Technical Analysis: GBP/USD Draws Attention Below 20-Day EMA
The GBP/USD pair has been climbing, currently around 1.3465. The 20-day exponential moving average (EMA) is positioned at 1.3438, with prices just above it, suggesting a positive trajectory.
The 14-day relative strength index (RSI) has moved upwards to 53, indicating solid momentum.
From a technical standpoint, the 61.8% retracement level at 1.3496 serves as immediate resistance. If the pair breaks above this threshold, it may signal a shift away from the bearish trend, potentially paving the way for gains towards the September 17th high of 1.3726.
Conversely, if it fails to breach 1.3496, the pair might retract toward the 50% retracement level at 1.3404, which could weaken momentum and keep the movement within a limited range.
(The technical analysis in this story was assisted by AI tools.)
Upcoming Economic Indicators
Consumer Price Index (Year-on-Year Change)
The Consumer Price Index (CPI) reflects inflationary or deflationary trends by measuring the price changes of a representative basket of goods and services. The government compiles and releases this data monthly. The CPI compares the current prices to those from the same month in the previous year. Generally, higher readings are regarded as favorable for the US dollar, while lower figures could be seen as negative.
