GBP/USD extends upside above 1.3500 on softer US Dollar

• GBP/USD gains momentum to around 1.3525 in Wednesday's early European session. 
• Uncertainty over tariff policy and concerns over Fed independence undermine the US Dollar. 
• Growing UK fiscal pressures and rising BoE rate cut bets might cap the pair's upside. 

The GBP/USD pair extends the rally to near 1.3525 during the early European session on Wednesday. The US Dollar (USD) remains weak against the Pound Sterling (GBP) as impending US President Donald Trump's tariff deadline looms. Investors will keep an eye on the preliminary reading of UK Purchasing Managers Index (PMI) reports, which are due later on Thursday. 

Uncertainty over tariff policy and concerns over the Federal Reserve (Fed) independence weigh on the Greenback. Investors brace for Trump's tariffs on top trading partners to take effect next month on one hand and bet that Trump will postpone them yet again on the other. Meanwhile, US Treasury Secretary Scott Bessent said earlier this week that the administration is more concerned with the quality of trade agreements than the timing.

Furthermore, worries about Fed independence dampen the market sentiment, as Trump has repeatedly railed against Fed Chair Jerome Powell and urged him to resign because of the US central bank's reluctance to cut interest rates. Fed Vice Chair Michelle Bowman on Tuesday said the Fed's ability to set monetary policy without political interference is "very important.

On the other hand, persistent UK political and fiscal risks, along with a cooling labor market, might undermine the GBP against the USD. Analysts expected the Bank of England (BoE) to deliver two interest rate reductions by the end of the year, which would take the bank rate down to 3.75%.