Key Support Holds for GBP/USD as Traders Eye US Inflation and UK GDP

[Ben Graham]

The Great British Pound has found support of a key confluence area around the 1.3380 handle The move has come as the US Dollar facing a selloff over Fed independence fears

Powell vs Trump 2.0

Over the weekend, Federal Reserve Chair Jerome Powell announced that the Justice Department has served the central bank with legal orders (subpoenas) and is threatening criminal charges.

Powell claims this is part of a larger campaign by the White House to pressure the bank. He explicitly stated that these threats are a punishment because the Fed refused to follow President Trump's demands to lower interest rates, choosing instead to make decisions based on what is best for the public.

While President Trump denies knowing anything about the investigation, he has a long history of attacking Powell for not cutting rates as quickly as he wants.

This move has brought Fed independence fears to the forefront once more. As a result the US Dollar struggled for the majority of the day.

The DXY does however face a crucial support test which may prove a tough nut to crack around the 98.70 handle.

US Dollar Index Daily Chart, January 12, 2026

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Source: TradingView

Catalysts Ahead with US Inflation & UK GDP Data

Traders are closely watching the UK's economic growth report on Thursday but before that tomorrow's US inflation report is expected to be higher than most experts predict (rising 0.4%). Investors are feeling calmer about the American job market after the unemployment rate dropped to 4.4% on Friday, even though the underlying details aren't entirely positive.

Finally, the dollar was expected to get a boost from the US Supreme Court, which is likely to rule against President Trump's tariffs sometime between Tuesday and Thursday. If not the Dollar may remain under pressure with the next catalyst likely to be Thursday UK GDP release.

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Technical Analysis - GBP/USD

From a technical perspective, GBP/USD did bounce off a key confluence area around the 1.3380 zone.

This area plays host to the 100 and 200-day MAs while also being a key area of support and resistance in the past.

The move today was further helped by fundamentals around the US dollar which has experienced a selloff.

The bullish move has also seen GBP/USD bounce off the 50 level on the period-14 RSI. This hints at bullish momentum.

On the upside cable does face some significant hurdles as well with the 1.3500 handle before the recent highs at 1.3568 comes into focus.

GBP/USD Daily Chart, January 12, 2026

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Source:TradingView.com

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