The British Pound is regaining upside momentum against the US Dollar on Thursday, with GBP/USD pushing back toward the 1.3500 psychological mark, close to its highest levels in two weeks. The pair quickly shrugged off Wednesday’s brief pullback and resumed its upward trajectory, largely driven by persistent selling pressure on the US Dollar rather than fresh UK-specific catalysts.

Market participants are now turning their attention to upcoming UK economic data for guidance on the domestic outlook. The Office for National Statistics (ONS) is expected to report that the UK economy expanded modestly by 0.1% in November. Manufacturing Production is forecast to grow by 0.5% on a monthly basis, while Industrial Production is projected to remain broadly unchanged. These releases are particularly important after recent weakness, as UK GDP contracted by 0.1% in both September and October following flat growth in August, raising concerns about stagnation risks.

The incoming data will also influence expectations around the Bank of England’s (BoE) policy path. At its December meeting, the BoE reiterated that monetary policy is likely to follow a gradual easing trajectory. Reinforcing this view, BoE policymaker Alan Taylor said during a summit in Singapore that interest rates could move toward neutral levels sooner than previously thought, noting that inflation may return to the 2% target by mid-2026. Such comments strengthen expectations that further easing lies ahead, even if it is implemented cautiously.

On the US side, the Dollar continues to struggle for direction. The US Dollar Index (DXY) trades slightly lower near 99.10, easing from recent monthly highs. This comes despite strong US inflation data earlier in the week, which showed headline and core CPI holding steady at 2.7% and 2.6% year-on-year in December. Those figures reinforced expectations that the Federal Reserve is unlikely to cut rates at its upcoming meeting.

However, political pressure on the Fed remains a key drag on the Greenback. US President Donald Trump has repeatedly urged Fed Chair Jerome Powell to deliver larger rate cuts, reigniting concerns over central bank independence. In response, senior officials from the ECB, BoE and several other major central banks issued a rare joint statement backing Powell and emphasizing that central bank independence is vital for financial and economic stability.

With the US Producer Price Index (PPI) data due later in the day, traders will look for further confirmation on inflation trends. Until then, sustained Dollar weakness and improving Sterling sentiment keep GBP/USD biased to the upside near current levels.

Trade Idea:
Buy GBP/USD on dips toward 1.3430–1.3450, targeting 1.3580, with a stop below 1.3360, as Dollar weakness supports further upside.