Pound Sterling turns upside down against its peers
- The Pound Sterling outperforms its major currency peers as the market sentiment improves.
- Weak US ISM Manufacturing PMI data has weighed on the US Dollar.
- Investors await the US NFP data for fresh cues on the Fed’s monetary policy outlook.
The Pound Sterling (GBP) gives back early gains against the US Dollar (USD) and drops to near 1.3520 during the European trading session on Tuesday. The GBP/USD pair falls back as the US Dollar recovers its early losses.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades mildly higher to near 98.45.
However, the outlook of the US Dollar remains uncertain due to weak United States (US) ISM Manufacturing PMI data for December and signals from Minneapolis Federal Reserve (Fed) President Neel Kashkari that the labour market is weak.
The data released on Monday showed that the ISM Manufacturing PMI dropped to 47.9 in December from 48.2 in the previous month. This is the 10th straight month with the manufacturing business activity contracting.
On Monday, Fed Kashkari warned that the “job market is clearly cooling”. Kashkari also signaled that there is more room for interest rate cuts, citing that “My [Kashkari] guess is we're [Fed] close to neutral now”.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.14% | 0.13% | 0.06% | 0.05% | -0.02% | -0.02% | 0.20% | |
| EUR | -0.14% | -0.01% | -0.09% | -0.09% | -0.16% | -0.16% | 0.06% | |
| GBP | -0.13% | 0.00% | -0.08% | -0.08% | -0.15% | -0.15% | 0.07% | |
| JPY | -0.06% | 0.09% | 0.08% | -0.01% | -0.08% | -0.09% | 0.14% | |
| CAD | -0.05% | 0.09% | 0.08% | 0.00% | -0.07% | -0.08% | 0.15% | |
| AUD | 0.02% | 0.16% | 0.15% | 0.08% | 0.07% | -0.00% | 0.22% | |
| NZD | 0.02% | 0.16% | 0.15% | 0.09% | 0.08% | 0.00% | 0.22% | |
| CHF | -0.20% | -0.06% | -0.07% | -0.14% | -0.15% | -0.22% | -0.22% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily digest market movers: Investors await US NFP data for December
- The Pound Sterling turns upside down, even as the market sentiment remains upbeat. Earlier in the day, the British currency outperformed its major peers as market jitters due to the capture of Venezuelan President Nicolas Maduro by the United States (US) military over drug-trafficking charges eased.
- On Monday, investors turned risk-averse after the US military action in Venezuela and the announcement from US President Donald Trump that Washington will restructure Venezuela’s Oil industry.
- On the domestic front, the United Kingdom (UK) economic calendar is light this week, therefore, market expectations for the Bank of England’s (BoE) monetary policy outlook are expected to drive the Pound Sterling.
- The BoE is expected to follow a gradual monetary easing path in 2026 as the UK inflation is still above the 2% target, despite price pressures slowing down in the past two months. The UK headline Consumer Price Index (CPI) inflation came down to 3.2% year-on-year (YoY) in November from a peak of 3.8% seen in September.
- Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data due for release on Friday. The US official employment data will significantly influence market expectations for the Fed's monetary policy outlook as the central bank reduced interest rates by 75 basis points (bps) to the 3.50%-3.75% range in 2025 due to downside labor market risks.
Technical Analysis: GBP/USD struggles to hold above 61.8% Fibo retracement at 1.3500
GBP/USD trades lower to near 1.3520 at the time of writing. However, the outlook of the price is bullish as the 20-day Exponential Moving Average (EMA) is rising, keeping the short-term bias pointed higher. A sustained close above this gauge favors follow-through on the advance.
The Relative Strength Index (RSI) at 64.35 is positive for bulls, confirming firm bullish momentum. Measured from the 1.3799 high to the 1.3008 low, the pair struggles to hold above the 61.8% Fibonacci retracement at 1.3497.
The trend tone remains positive while the pair holds over the ascending 20-EMA, with the indicator last at 1.3444 acting as dynamic support on dips. On the topside, the pair could gain further towards the 78.6% retracement at 1.3630 if it holds above the 61.8% Fibo hurdle.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
