Pound Sterling Soars to Multi-Month Highs as Dollar Slips on Powell Succession Rumors and Weak US GDP

Summary:

The British Pound surged to a nearly four-year high against the US Dollar as uncertainty swirled over Federal Reserve leadership.

Buy GBPUSD

EXP

Trading

1.37500

ENTRY

1.40000

TGT

1.35500

1.37432 +0.00149 +0.11%

Point

Flat

1.35500

CLOSING

1.37500

ENTRY

1.40000

TGT

The British Pound rallied sharply against the US Dollar on Thursday, breaking toward multi-month highs, as growing uncertainty around U.S. Federal Reserve leadership, coupled with mixed economic data, sent the greenback tumbling. At the heart of the move was a Wall Street Journal report stating that President Donald Trump may announce a replacement for Fed Chair Jerome Powell by as early as September or October — a headline that caught markets off guard and injected a fresh layer of political risk into the Fed’s already delicate forward guidance.

At the time of writing, the GBP/USD pair trades at 1.3746, marking a 0.61% daily gain and climbing to levels not seen since late 2021. Sterling’s strength has been aided by a combination of relative calm in UK macroeconomic news and renewed pressure on the Dollar as investors reassess the trajectory of U.S. monetary policy amid growing political noise.

According to the WSJ article, the Trump administration is actively considering candidates to replace Jerome Powell, whose term ends in early 2026. Potential contenders reportedly include former Fed Governor Kevin Warsh, National Economic Council Director Kevin Hassett, and Treasury Secretary Scott Bessent. While no formal decisions have been made, the prospect of a leadership shakeup has unsettled investors, as it raises questions over future Fed independence, policy continuity, and how a new chair might approach inflation and employment mandates in a politically charged election year.

The uncertainty surrounding Powell’s future has compounded pressure on the U.S. Dollar, which was already grappling with mixed data releases. Markets now face the confusing scenario of needing to monitor both Powell’s statements and possible early signals from a successor, should the nomination process move ahead sooner than expected.

Adding fuel to the fire, Powell testified before Congress this week, reiterating that the central bank is in wait-and-see mode, monitoring the lingering impact of U.S. tariff policies on inflation. He hinted that should inflation prove transitory and decline sustainably, rate reductions could be considered — a dovish tilt that markets are increasingly interpreting as the groundwork for easing later in the year.

Economic indicators released on Thursday painted a mixed picture of U.S. growth. While Durable Goods Orders surged by a stunning 16.4% in May — driven largely by a spike in commercial aircraft orders — the broader macro landscape looks less rosy. Revised data from the Bureau of Economic Analysis showed that Q1 2025 GDP contracted by -0.5% quarter-on-quarter, more than double the initial -0.2% print. This marks the weakest quarterly performance since early 2023 and raises concerns that the U.S. economy may be losing momentum faster than previously expected.

Meanwhile, Initial Jobless Claims dropped to 236,000 for the week ending June 21, beating expectations and the prior week’s 245,000 reading. However, two of the last three weekly reports came in higher than forecast, suggesting that the labor market may be cooling — albeit gradually. Together, the GDP miss and Powell’s remarks reinforced market expectations that the Fed could begin cutting rates later this year, pressuring Treasury yields and the U.S. Dollar.

On the UK front, the economic calendar was light, though Bank of England Governor Andrew Bailey delivered remarks that reaffirmed a slow and steady path toward easing. Bailey emphasized that while inflation is moving in the right direction, policy still needs to remain “restrictive for sufficiently long” to ensure inflation returns to the 2% target. He also underlined that rate cuts, when they come, would follow a “gradual and careful” trajectory.

Markets are currently pricing in a 76% probability of a rate cut at the BoE’s August meeting, according to OIS futures — a dovish shift that would typically weigh on the Pound. Yet, GBP/USD surged regardless, driven more by Dollar fragility than domestic optimism.

Some strategists warn that Sterling’s strength may be short-lived. Nick Rees, Head of Macro Research at Monex, told Bloomberg, “I think once things calm down and markets have a little bit more time to focus on the UK fiscal situation, I think big downside risk is building for the Pound that could start to play out in the weeks ahead.” Concerns over persistent deficits, soft productivity, and political uncertainty may eventually reassert downward pressure on Sterling.

Technical Analysis

From a technical standpoint, the GBP/USD pair continues to post higher highs, riding a strong uptrend bolstered by its position above the 50-day exponential moving average (EMA) and a rising bias line. Despite the RSI flashing overbought signals, bullish momentum appears intact, supported by positive divergence and growing investor appetite for risk assets amid Dollar weakness.

The pair has cleared multiple resistance levels and appears poised to challenge the 1.3800 zone, a psychological barrier last tested in early 2021. Should price action extend above this level, further gains could open toward the 1.3865 region, followed by the 1.4000 handle.

On the downside, initial support lies around the 1.3660 area — a prior breakout point and the location of the 9-day EMA. A break below this level could expose the pair to a corrective move toward the 1.3550 zone, which coincides with stronger structural support.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3750

STOP LOSS: 1.3550

TAKE PROFIT : 1.4000

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

1360

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63.79%

P/L Ratio

0.74

Focus on

XAUUSD, EURUSD, GBPUSD

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Pound Sterling Soars to Multi-Month Highs as Dollar Slips on Powell Succession Rumors and Weak US GDP

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