• GBP/USD caught a limited bullish extension on Monday, testing 1.3700.
• Market sentiment is broadly tilted against the US Dollar, keeping Cable well-bid.
• Investors continue to bank on a renege of fresh tariff threats and are on the lookout for Fed policy tone shifts.

GBP/USD caught a halting bullish step higher to open the new trading week, knocking on the 1.3700 handle for the first time since September. The Trump administration threatened additional tariffs on a number of European nations if they don’t give over control of Greenland to the US, but markets continue to bank on the usual turnaround on trade war rhetoric from the White House.

UK data remains strictly low-tier this week, with the Federal Reserve’s (Fed) latest interest rate decision standing as the week’s key event. The Fed is broadly expected to stand pat on interest rates, but investors will be looking for any meaningful tonal shifts on policy. The Trump administration is also expected to announce Trump’s upcoming pick to replace Fed Chair Jerome Powell as head of the Fed when Powell’s term ends in May.

At the current cut, interest rate futures markets are pricing in at least two quarter-point interest rate cuts before the end of the year. This runs a little faster than the Fed’s own projections, which see one cut per year over the next two years on the outside. Trump’s upcoming pick for Fed Chair will likely be friendly to a more accommodative policy stance, and could swing the needle steeply toward further rate cuts.

GBP/USD price forecast

GBP/USD is well on its way into overbought territory, tapping a four-month high on Monday at the 1.3700 handle and marking in a strong January performance as the US Dollar continues to weaken. It will take a long drop to push Cable bids back into the middle range, with the 50-day Exponential Moving Average (EMA) languishing near the 1.3400 region.

GBP/USD daily chart