GBP/USD eases from multi-month top, trades below mid-1.3500s amid USD uptick

GBP/USD struggles to capitalize on the previous day’s blowout rally amid a modest USD uptick.
Persistent geopolitical uncertainties offset Monday’s mixed US PMIs and support the Greenback.
The divergent Fed-BoE policy expectations might act as a tailwind for spot prices and favor bulls.

Haresh Menghani FXStreet

The GBP/USD pair edges lower during the Asian session on Tuesday and reverses a part of the previous day's strong move up to the 1.3545-1.3550 area, or its highest level since September 2025. The downtick, however, lacks bearish conviction, with spot prices currently trading around the 1.3535-1.3530 region, down less than 0.10% for the day.

As investors look past Monday's mixed US PMI data for December 2025, the US Dollar (USD) attracts some safe-haven flows on the back of rising geopolitical tensions and acts as a headwind for the GBP/USD pair. The S&P Global US Manufacturing PMI held steady at 51.8 and indicated continued expansion. In contrast, the Institute for Supply Management's (ISM) Manufacturing PMI showed signs of persistent contraction and declined to 47.9 from 48.2 in November.

However, the US military attack on Venezuela, heightened political tensions between Saudi Arabia and the UAE over a conflict in Yemen, and the lack of progress in the Russia-Ukraine peace deal help limit the downside for the Greenback. The upside for the USD, however, seems capped amid bets for at least two more interest rate cuts by the US Federal Reserve (Fed) this year. This, along with hawkish Bank of England (BoE) expectations, supports the GBP/USD pair.

A narrow vote split to lower borrowing costs in December pointed to differences within the committee amid the recent inflation surprise. In fact, the British Retail Consortium reported this Tuesday that overall shop prices were up 0.7% YoY in December and food inflation rose to 3.3% from 3.0% in November. This might force investors to scale back expectations for more policy easing by the BoE and underpin the British Pound (GBP), warranting caution for the GBP/USD bears.

Traders now look forward to the release of the final Services PMI from the UK and the US for a fresh impetus. The immediate market reaction, however, is likely to be muted as the focus remains glued to the closely-watched US Nonfarm Payrolls (NFP) report on Friday. Apart from this, other important US macro data scheduled at the beginning of a new month might provide cues about the Fed's rate-cut path, which will influence the USD demand and drive the GBP/USD pair.

Economic Indicator

BRC Shop Price Index (YoY)

The British Retail Consortium (BRC) Shop Price Index measures price changes in the popular retail outlets in the UK. The changes in the SPI are widely followed as an indicator for inflationary pressures. A high reading is seen as positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

EUR/USD accelerates losses, focus is on 1.1800

EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.

GBP/USD turns negative near 1.3540

GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold battle to regain $5,000 continues

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and challenging two-day highs just above the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.