The dollar was slightly volatile, with the pound rebounding moderately from a three-week low against the dollar, waiting for the U.S. CPI to land.

The pound rose slightly against the dollar for the second consecutive trading day on Tuesday, continuing the previous repair trend from around 1.3390 (a three-week low). The exchange rate is currently running at the 1.3475 line, an increase of nearly 0.10% during the day.

The weak performance of the US dollar provided the main support for the exchange rate.

Central to the pressure on the dollar is rising concerns about the independence of the US Federal Reserve after financial marekts focused on the central bank's policy independence following a criminal investigation of its chairperson.

In a rare public statement, the Fed chairperson stressed that the charges stem from the central bank's insistence on setting interest rate policy based on public interest rather than political preferences.

This statement undermined market confidence in the dollar in the short term.IG Forex

However, the downside of the dollar remains limited. The recent decline in the US unemployment rate has largely offset the impact of the lower-than-expected non-farm payrolls data, strengthening the market's judgment that the Federal Reserve will maintain policy stability in Quarter 1.

At the same time, investors are awaiting the upcoming release of US consumer inflation data, and dollar bears are relatively cautious ahead of key data.

Looking at the pound itself, market expectations that the Bank of England may cut interest rates further in 2026 are heating up, which to some extent limits the rally momentum of the pound. The US producer price index and the UK monthly GDP data to be released later this week may provide new direction for the exchange rate.

From the daily chart, GBP/USD rallied technically after gaining support near 1.3390, and the price returned to near the short-term moving average, indicating that the downward momentum has eased. But the overall structure is still in the previous correction structure, with the 1.3500-1.3550 area above constituting an important resistance, and the 1.3400 line below is a short-term long-short watershed.

Before effectively breaking through key resistance, the exchange rate is more likely to maintain a range-bound volatility repair trend.

Editorial opinion:

Overall, the current rebound of the pound against the dollar is more due to the weakening of the dollar, rather than the significant improvement in the fundamentals of the pound. In the context of the uncertain policy outlook of the Federal Reserve and the expectation of the Bank of England to cut interest rates, it may be difficult for the exchange rate to form a unilateral trend in the short term.

The key to the follow-up trend still depends on whether US inflation data and UK economic data can change market expectations for the path of monetary policy in both countries.