GBP/USD rallies on US PPI dip and Trump's potential Powell removal

• US PPI slows to 2.3% YoY, reigniting July Fed cut speculation.
• Trump reportedly considers removing Fed Chair Powell, adds to market volatility.
• UK CPI jumps to 3.6% YoY, highest since Jan 2024, reducing BoE cut odds.

The GBP/USD reverses its course and rallies as the latest US Producer Price Index (PPI) reignites hopes of a rate cut by the Fed, while headlines suggest that Trump could fire Fed Chair Powell. At the same time, inflation on the consumer side in the UK surprised investors, exceeding forecasts. At the time of writing, the pair trades at 1.3454, up by 0.55%.

Cable jumps 0.55% to 1.3454 amid weaker US factory prices and speculation Trump may fire Fed Chair Powell

The Producer Price Index (PPI) in the US showed that factory prices remained unchanged in June, although producer goods prices rose 0.3% month-over-month. PPI dipped from 2.6% to 2.3% YoY, below forecasts of 2.5%. The underlying prices edged lower, from 3% to 2.6%, which is below estimates of 2.7%.

Sources cited by Reuters revealed that "The inflation threat is alive and very real, and if this does not put a Fed rate cut in July out of the question, then nothing will." At the upcoming meeting, the Fed is expected to keep rates unchanged at the 4.25%-4.50% range, with odds standing at 96.9%.

In the meantime, US President Donald Trump reportedly questioned Republican lawmakers if he should fire the Fed Chair Jerome Powell, as revealed by CBS, citing sources.

Bloomberg revealed that Trump is likely to fire Fed Chair Powell soon, according to White House sources.

Across the pond, Britain's inflation recorded its highest print since January 2024, as CPI hit 3.6% YoY, dampening expectations for rate cuts by the Bank of England. The consensus expected a rise to 3.4%. Furthermore, core CPI is also up, by 3.7% YoY up from estimates and May's 3.5%.

Although the data should put rate cuts to bed, investors had already priced in an 80% chance of a 25-basis-point rate cut in August.

GBP/USD Price Forecast: Technical outlook

The GBP/USD remains upward biased, found support at the June 23 low of 1.3369, with sellers unable to decisively push prices below to test the 1.3350 mark. Bullish momentum is picking up on Trump's remarks, as depicted by the Relative Strength Index (RSI).

If GBP/USD stays above 1.3400, expect a test of the 50-day SMA at 1.3495 in the near term. Further resistance lies overhead at 1.3500 and the 20-day SMA at 1.3581. On the flip side, if the pair tumbles below 1.3350, expect a test of the 100-day SMA at 1.3270.