GBP/USD shrugged off increased U.S. tariff noise and higher U.S. Treasury yields, regaining 1.24 in early NorAm, though further gains may be limited before the market digests two days of congressional testimony by Fed Chair Jerome Powell and Wednesday's U.S. CPI release. Markets will be watching to see whether these events reinforce the Fed's high for longer rate stance.

So far in 2025, sterling has mostly traded within a narrow 1.2249 to 1.2575 range, excluding a brief dip to 1.21 in mid-January due to concerns over UK fiscal stability. With the fiscal concerns having eased, markets are now focused on relative rate expectations, influenced by tariff levies on countries such as China, Canada, the euro zone and Mexico. Traders will scrutinize Powell's testimony for insights into the Fed’s response to persistent inflation strong economic growth and tariff uncertainties. Without the benefit of knowing Wednesday's price data, the prevailing Fed rate outlook remains one of caution. Fed policymakers have taken a wait-and-see tack on further rate cuts, which has kept the dollar relatively well bid recently.

Barring a significant downside miss in CPI data Wednesday, further GBP/USD gains are likely to be capped by the falling 55-DMA at 1.2498 and Feb. 3 high at 1.2550.
GBP Chart:

(Paul Spirgel is a Reuters market analyst. The views expressed are his own)