GBP/USD Climbs Toward 1.3450 as Dovish Fed Comments Weigh on US Dollar

GBP/USD Climbs Toward 1.3450 as Dovish Fed Comments Weigh on US Dollar

The GBP/USD currency pair is on the rise again, reaching around 1.3440 in early Asian trading on Friday. The pair is recovering from minor losses seen in the previous session, largely due to US Dollar weakness driven by dovish remarks from Federal Reserve officials.

Fed Officials Signal Possible Rate Cuts

In a notable shift in tone, San Francisco Fed President Mary Daly commented that it is “reasonable” to expect two interest rate cuts this year, urging policymakers not to delay action. Daly also stated that post-pandemic neutral rates could stabilize above 3%, hinting at a longer-term policy adjustment.

Echoing similar views, Fed Governor Christopher Waller suggested that the Federal Reserve should cut interest rates as early as July, citing mounting economic risks. Waller warned that delaying action could force more aggressive tightening later, potentially harming the economy.

These dovish sentiments have pressured the US Dollar Index (DXY), offering tailwinds for GBP/USD.

Pound Sterling Supported by UK Data

On the UK front, mixed employment data offered limited downside pressure to the Pound. While wage growth and labor figures showed signs of strain, the underlying strength in the UK labor market remains intact, lending mild support to Sterling buyers.

As a result, GBP/USD is gradually regaining lost ground, supported by both external (USD weakness) and internal (UK economic resilience) factors.

Market Eyes UoM Consumer Sentiment

Looking ahead, the release of the University of Michigan Consumer Sentiment report later on Friday could further influence USD movement. A weaker-than-expected reading would likely reinforce the case for rate cuts, providing further upside potential for the GBP/USD pair.

Outlook: Can GBP/USD Break 1.3450?

With growing expectations of Fed rate cuts and steady UK fundamentals, traders may watch closely to see if GBP/USD can break above the 1.3450 resistance level. Short-term momentum appears positive, but market reaction to incoming US macroeconomic data will be key.