GBP/USD Rises to 1.3450 as US Dollar Weakens After Moody’s Downgrade

GBP/USD Rises to 1.3450 as US Dollar Weakens After Moody’s Downgrade

May 22, 2025 – The GBP/USD currency pair continued its upward trend on Thursday, rising to 1.3450, marking the fourth consecutive day of gains. The Pound is benefiting from a weaker US Dollar, which has been under pressure following the Moody's downgrade of the US credit rating from Aaa to Aa1. This downgrade comes in the wake of similar actions by other agencies such as Fitch Ratings in 2023 and Standard & Poor’s in 2011.

The US Dollar’s weakness comes at a time when concerns about US fiscal health have intensified. Moody’s warned that US federal debt is projected to rise to 134% of GDP by 2035 from 98% in 2023, with the budget deficit widening to nearly 9% of GDP. These projections reflect concerns over increasing debt service costs, expanding entitlement programs, and declining tax receipts.

On the other hand, Pound Sterling received support from stronger-than-expected UK inflation data released on Wednesday. The data showed that inflation remains elevated in the UK, which helped bolster the Pound against the weakening Greenback.

In addition to the rating downgrade, US Federal Reserve policymakers have expressed growing concerns about the state of the US economy. San Francisco Fed President Mary C. Daly and Cleveland Fed President Beth Hammack noted a decline in both consumer and business sentiment, attributing part of this shift to changes in US trade policies.

The GBP/USD pair is now approaching levels near 1.3450, and traders will be looking closely at upcoming UK PMI data later in the day for additional clues about the UK economy. If the US Dollar weakness persists, GBP/USD may be poised to challenge the next resistance level around 1.3500.