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The British Pound (GBP) rose 0.20% against the US Dollar (USD) on Friday as the USD retreated from year-to-date highs. This reversal came despite the Federal Reserve (Fed) maintaining its inflation-focused stance, with markets now pricing in a less aggressive monetary policy path. The Pound's rebound was also supported by improved political stability in the UK following recent leadership changes.
The shift in USD momentum highlights growing expectations that the Fed may slow its tightening cycle, which could reduce pressure on the Pound. Traders are closely monitoring the divergence in central bank policies between the US and UK, as well as upcoming economic data releases. A weaker USD environment generally benefits GBP/USD bulls, especially if UK inflation shows signs of easing.
For markets, the key focus will be on the Fed's next policy meeting and UK inflation figures. A sustained GBP/USD rally could test critical resistance levels around 1.2800. Investors should also watch for any renewed political uncertainty in the UK that might reverse the current positive momentum.
