GBP/USD surges to 1.3600, hits four-month high as Dollar selling intensifies

• GBP/USD surges to the 1.3600 area, hitting its highest level since September 2025.
• Strong UK PMI and Retail Sales data lift Sterling, cooling near-term BoE rate cut bets.
• US Dollar remains under broad-based pressure amid trade, policy and Fed-credibility concerns.

The British Pound (GBP) continues to outperform the US Dollar (USD) on Friday, with GBP/USD climbing to the 1.3600 handle as the Greenback remains under broad-based selling pressure. At the time of writing, the pair is up nearly 0.8% on the day, marking its highest level since September 18, 2025.

Sterling is also drawing support from stronger-than-expected UK economic data, which has tempered near-term rate cut expectations at the Bank of England.

The flash Composite Purchasing Managers Index (PMI) rose to 53.9 in January from 51.4, with the Services PMI jumping to 54.3 from 51.4, while the Manufacturing PMI improved to 51.6 from 50.6. On the consumer side, Retail Sales rose 0.4% MoM in December, rebounding from a 0.1% decline in November, while annual sales accelerated to 2.5% from 1.8%.

Meanwhile, a mixed set of US economic data failed to stem the bearish sentiment toward the Greenback. Markets remain wary that US President Donald Trump’s disruptive trade agenda and repeated use of tariffs as a policy weapon are eroding investor confidence in US assets.

Concerns are also growing over political interference in the Federal Reserve’s (Fed) independence, amid an ongoing Supreme Court case involving Fed Governor Lisa Cook, after President Donald Trump attempted to remove her over mortgage-fraud allegations.

At the same time, reports that US prosecutors have launched a criminal inquiry into Fed Chair Jerome Powell related to his congressional testimony on the central bank’s renovation project have added to investor unease over the credibility and independence of US monetary policy.

These concerns are fueling debasement fears and encouraging investors to rotate out of the US Dollar into other G10 currencies.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 98.76, hovering near its lowest level since October 3.

Meanwhile, sustained expectations that the Fed will deliver two interest rate cuts this year are adding to the downside pressure on the Greenback.