Pound Sterling edges lower against US Dollar despite Trump announces removal of Fed’s Cook

• The Pound Sterling falls marginally to near 1.3440 against the US Dollar even as US President Trump fires Fed Governor Cook.
• The removal of Fed’s Cook has dampened the central bank’s independence.
• Investors await BoE Mann’s speech for fresh cues on the monetary policy outlook.

The Pound Sterling (GBP) ticks down to near 1.3440 against the US Dollar (USD) during the European trading session on Tuesday. The GBP/USD pair faces slight selling pressure as the US Dollar edges higher, even as the ousting of Federal Reserve (Fed) Governor Lisa Cook by United States (US) President Donald Trump has increased concerns over the central bank’s independence.

On early Tuesday, US President Trump shared a letter on Truth.Social in which he announced the removal of Fed Governor Cook, citing that she made false statements on one or more mortgage agreements.

Market experts have seen Fed Cook’s removal by US President Trump as a serious dent in the central bank’s independence. They have also argued that the intention behind Cook’s removal is to fit people in the Federal Open Market Committee (FOMC) to support Trump's economic agenda.

"The concern is the intent of the Trump administration: it’s not to preserve Fed integrity, it’s to install Trump’s own people at the Fed,” analysts at Capital.com said, Reuters reported.

However, Cook said that she will continue to carry out her duties as Fed Governor. In a statement shared by her attorneys, “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so.”

In the past, President Trump has also attacked the Fed’s independence several times by threatening Chair Jerome Powell for not lowering interest rates. However, Trump praised Powell after his speech at the Jackson Hole Symposium on Friday, in which he surprisingly delivered a dovish interest rate guidance, citing labor market concerns.

Daily digest market movers: Pound Sterling trades calmly ahead of BoE Mann’s speech

• The Pound Sterling trades broadly stable ahead of Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann’s speech at 16:00 GMT. Investors will pay close attention to BoE Mann’s speech to get cues about whether the United Kingdom (UK) central bank will cut interest rates again in the remainder of the year.
• Financial market participants doubt whether the BoE to ease monetary policy further as inflationary pressures are turning out to be persistent. Inflation in the UK economy has been accelerating at a faster pace in recent months.
• Investors should note that BoE’s Mann was one of the MPC members who voted for holding interest rates in the monetary policy meeting earlier this month. In the meeting, the BoE reduced its key borrowing rates by 25 basis points (bps) to 4%, with a slim majority.
• In the US, investors await the Personal Consumption Expenditures Price Index (PCE) data for July, which is scheduled to be released on Friday. The inflation data will influence market expectations for the Fed’s monetary policy outlook.
• According to the CME FedWatch tool, there is an 84% chance that the Fed will cut interest rates in the September monetary policy meeting.
• Fed dovish expectations intensified earlier this month after the Nonfarm Payrolls (NFP) report for July showed downward revisions in May and June.

Technical Analysis: Pound Sterling falls to near 1.3440

The Pound Sterling drops to near 1.3440 against the US Dollar on Tuesday. The near-term outlook of the GBP/USD pair is uncertain as it wobbles near the 20-day Exponential Moving Average (EMA), which trades around 1.3460.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting a sharp volatility contraction.

Looking down, the August 11 low of 1.3400 will act as a key support zone. On the upside, the July 1 high near 1.3790 will act as a key barrier.