• The GBP/USD outlook falters as dollar recovers after court ruling.
• Fed maintained cautious tone amid trade uncertainty and inflation risks.
• UK food inflation ticks up, decreasing odds of BoE rate cut.

The GBP/USD outlook tumbles as the pair hit fresh lows around 1.3414 on Thursday, retreating from multi-month top marked at 1.3592 on Monday. The US dollar soared in response to major legal development. A US federal court blocked President Trump’s decision to impose broad import tariffs, calling it overstepping authority in the context of IEEPA.  The greenback cheered the decision immediately as markets viewed it as a de-escalation in trade tension. Hence, the US yields and equities also surged.

However, the analysts expect the dollar strength to be transient. Legal experts warn that the US government can find alternatives like section 122 or section 301 to restore tariffs. The looming uncertainty can deteriorate the risk sentiment.

On the data front, the focus now turns to the US Q1 GDP numbers ahead of Friday’s PCE Index. Both events are meaningful for the Fed in shaping future policies. The central bank’s meeting minutes from May meeting showed a heightened caution, with officials stressing on keeping rates on hold due to inflation risks and growth worries amid tariff disruptions.

Meanwhile, the UK inflation data complicates the scenario for the Bank of England. Food inflation surged for fourth consecutive month, reducing the odds of a rate cut. According to Barclays Bank, the interest rates can fall to 3.5% only Feb 2026, which supports the pound in medium term.
 

GBP/USD Technical Outlook: Pullback within Uptrend

(Click on image to enlarge)

GBP/USD daily chart

The GBP/USD remains technically bearish in the short-term after falling well below the 1.3500 handle. The next levels for the sellers emerge at 1.3400 ahead of 1.3250. Though the price has recovered from the daily lows, finding acceptance above 1.3480 can turn the sentiment.

After surging more than 11% from the January lows of 1.2100, this could be a pullback, pausing the uptrend for a while. Rising above the 1.3500 level can open the doors for further gains to 1.3600.

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