GBP/USD retreated further on Wednesday, falling for a second straight session, retreating below 1.3500 after attempting to retake 1.3600 earlier in the week. The sterling market is retreating from the top of the bull run that pushed the pound to multi-year highs, but momentum remains in favor of sterling buyers.

The latest minutes of the Federal Reserve’s (Fed) May 6-7 Federal Open Market Committee (FOMC) rate meeting show that the Fed’s wait-and-see attitude is deeply entrenched. At the latest Fed meeting, policymakers noted that the safe-haven status of the US dollar (USD) has taken a hit recently. They warned that the "persistent shift" in the dollar's status could have lasting effects on the US economy.

Almost all FOMC members agreed at the May rate meeting that inflation risks could be more "persistent" than expected. Fed staff directly pointed to the impact of tariffs as a key driver of the FOMC's weakening view on the US economic outlook, blaming the Trump administration's tariff policy for the deteriorating US economic conditions and the vague outlook for inflation and growth.

US data remains important for the rest of the trading week. US first quarter gross domestic product (GDP) growth data is due on Thursday. Friday will close the trading week with US personal consumption expenditures price index (PCE) inflation data for April. The market hopes that key inflation indicators can continue to ease before the impact of the Trump administration's tariff policy begins to filter through the main data sets.

GBP/USD remains in a bearish downtrend, with bids sinking to 1.3450. However, price action remains firmly in bullish territory, with the daily candlestick chart well above the 50-day exponential moving average (EMA), which is located around 1.3210.

Overall, the British pound has performed strongly in 2025, rising 11.3% since the multi-month low of 1.2100 in mid-January. GBP/USD fully reversed its losses in the last quarter of 2024, rising to a multi-year high close to 1.3450 this week.