Pound Sterling wobbles as investors await Fed Kugler's replacement, BoE's decision

• The Pound Sterling consolidates around 1.3300 as investors await for Fed Kugler's replacement and the BoE's monetary policy outcome.
• US President Trump said he has narrowed the list for the Fed Chair's potential candidates to four.
• The BoE is expected to cut interest rates by 25 basis points to 4%.

The Pound Sterling (GBP) trades in a tight range around 1.3300 against the US Dollar (USD) during the European trading session on Wednesday. The GBP/USD pair tracks a rangebound US Dollar as investors await the announcement of Federal Reserve (Fed) Governor Adriana Kugler's replacement, which should happen sometime this week after she announced her resignation on Friday.

At the time of writing, the US Dollar index (DXY), which tracks the Greenback's value against six major currencies, wobbles around 98.80.

On Tuesday, US President Donald Trump said to reporters that he will announce Fed Kugler's replacement by the end of the week. Market experts believe that the entry of Trump's candidate into the Federal Open Market Committee (FOMC) would be unfavorable for the Fed's independence as its decisions could be biased toward Trump's economic agenda.

"Kugler's resignation allows the president to further shape the FOMC (Federal Open Market Committee) in his own image," analysts at Harris Financial Group said, Reuters reports.

Meanwhile, US President Trump confirmed in an interview with CNBC on Tuesday that Treasury Secretary Scott Bessent won't be the successor of Fed Chair Jerome Powell and that he has narrowed the list of potential candidates to four, including White House economic adviser Kevin Hassett and former Fed Governor Kevin Warsh. "We're also looking at the Fed chair, and that's down to four people right now, two Kevins and two other people," Trump said.

Daily digest market movers: Pound Sterling looks at the BoE

• The Pound Sterling trades lower against its major peers on Wednesday, with investors awaiting the Bank of England's (BoE) monetary policy outcome on Thursday. Traders have almost fully priced in a 25 basis points (bps) interest rate reduction that will push interest rates lower to 4%. Therefore, the major driver for the British currency will come from any fresh cues on the monetary policy guidance given by BoE officials.
• BoE Governor Andrew Bailey has been guiding a "gradual and careful" stance to the monetary expansion path, citing risks to inflation returning sustainably to the 2% target in the medium term have "dissipated".
• Investors will also pay close attention to the inflation and the labor market outlook from the BoE. Inflationary pressures in the United Kingdom (UK) have elevated significantly due to higher energy and food costs. Additionally, consumer inflation expectations have risen, partly responding to the increase in welfare spending by Chancellor of the Exchequer Rachel Reeves.
• Meanwhile, official employment data shows that labor demand has slowed sharply due to an increase in employers' contributions to social security schemes.
• In the US, lower hiring levels has also paved the way for interest rate cuts by the Fed in the September meeting. According to the CME FedWatch tool, the Fed is almost certain to cut borrowing rates by 25 basis points (bps) to 4.00%-4.25%.
• The US NFP report showed that July's employment data missed estimates by a significant margin, as well as a sharp downward revision in May and June's payroll data,and an increase in the Unemployment Rate.
• Meanwhile, tariff fears have resurfaced again as President Trump confirms that he will be announcing tariffs on semiconductors and chips, and pharma "in the next week or so".

Technical Analysis: Pound Sterling consolidates around 1.3300

The Pound Sterling trades in a limited range around 1.3300 against the US Dollar (USD) on Wednesday. The outlook of the pair remains bearish as the breakdown of the Head and Shoulders (H&S) chart pattern holds and the 20-day Exponential Moving Average (EMA) slopes downwards to near 1.3395. The neckline of the H&S pattern is plotted around 1.3388.

The 14-day Relative Strength Index (RSI) rebounds to near 40.00. A fresh bearish momentum would emerge if the RSI resumes its downside trend.

Looking down, the May 12 low of 1.3140 will act as a key support zone. On the upside, the July 30 high near 1.3385 will act as a key barrier.