GBP/USD extended its gains for the third straight session, trading around 1.3620 during Asian hours on Wednesday (6/25). The pair was hovering around 1.3648, the highest since February 2022, recorded on Tuesday. The risk-sensitive GBP/USD pair received support from improving risk appetite amid easing tensions in the Middle East.

US President Donald Trump announced that a ceasefire between Iran and Israel was in effect on Tuesday, raising hopes for an end to the 12-day conflict. However, caution remains amid uncertainty over the sustainability of the truce. Traders are likely to focus on a potential revival of nuclear talks and the fate of Iran's enriched uranium.

During his testimony before the congressional budget committee on Tuesday, Fed Chair Powell advocated for a delay in interest rate cuts, possibly until sometime in the fourth quarter. Powell added, "When the time is right, expect rate cuts to continue." He also said that data suggests that at least some tariffs are hitting consumers and that he will start to see more tariff inflation starting in June.

Kansas City Fed President Jeff Schmid said Wednesday morning that the central bank should wait to see how uncertainty around tariffs and other policies impact the economy before adjusting interest rates. Schmid added that the resilience of the economy gives us time to see how prices and the economy develop, according to Bloomberg.

GBP/USD's gains could be limited as the pound sterling (GBP) may face challenges due to dovish comments from Bank of England (BoE) officials on the policy outlook. BoE Governor Andrew Bailey pointed to slowing wage growth and rising economic inactivity, though he stressed concerns about the reliability of labor data. Deputy Governor Dave Ramsden said the easing labor market was behind his vote for a rate cut, warning that it could push inflation below its 2% target. (alg)

Source: FXstreet