Pound Sterling surges against US Dollar on worsening US-EU relations
- The Pound Sterling attracts significant bids against its currency peers after mixed UK employment data.
- UK employers hired 82K fresh workers in three months ending November, while the jobless rate remains steady.
- The US Dollar weakens further amid the US-EU dispute over Greenland’s future.
The Pound Sterling (GBP) jumps to near 1.3490 against the US Dollar during the European trading session on Tuesday. The GBP/USD pair extends Monday's gains as “Sell America” trade intensifies due to ongoing disputes between the United States (US) and the European Union (EU) over Greenland.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is 0.54% down to near 98.50.
Over the weekend, US President Donald Trump announced 10% tariffs on several EU members and the United Kingdom (UK), leaving scope for further increase, in retaliation for their opposition to Washington’s plans to purchase Greenland.
In response, several EU members and UK Prime Minister (PM) Keir Starmer have criticized Trump for invoking a tariff war to fulfill his intentions of acquiring Greenland.
Market experts have warned that a prolonged US-EU dispute could result in a loss of confidence in Trump’s leadership, a strained alliance with the world’s biggest economy, and a prolonged decline in the appeal of US assets.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.74% | -0.39% | -0.19% | -0.33% | -0.28% | -0.76% | -1.03% | |
| EUR | 0.74% | 0.35% | 0.56% | 0.41% | 0.47% | -0.03% | -0.30% | |
| GBP | 0.39% | -0.35% | 0.21% | 0.06% | 0.11% | -0.38% | -0.65% | |
| JPY | 0.19% | -0.56% | -0.21% | -0.13% | -0.09% | -0.58% | -0.84% | |
| CAD | 0.33% | -0.41% | -0.06% | 0.13% | 0.05% | -0.44% | -0.70% | |
| AUD | 0.28% | -0.47% | -0.11% | 0.09% | -0.05% | -0.48% | -0.74% | |
| NZD | 0.76% | 0.03% | 0.38% | 0.58% | 0.44% | 0.48% | -0.27% | |
| CHF | 1.03% | 0.30% | 0.65% | 0.84% | 0.70% | 0.74% | 0.27% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Daily Digest Market Movers: Pound Sterling rises ahead of UK CPI data
- The Pound Sterling rises sharply against its major peers on Tuesday after the release of the United Kingdom (UK) employment data for the three months ending in November. The labor market report showed that the Unemployment Rate remained steady at 5.1%, while it was expected to drop to 5%.
- The report also showed that the economy added 82K fresh workers after a reduction in the laborforce by 17K in the three months ending in October.
- Meanwhile, Average Earnings, a key measure of wage growth, rose at a moderate pace in the quarter ending in November. Average Earnings Excluding Bonuses grew at an annualized pace of 4.5%, as expected, slower than the prior reading of 4.6%. The wage growth measure, including bonuses, rose 4.7%, faster than expectations of 4.6%, but slower than the former release of 4.8%, upwardly revised from 4.7%.
- Signs of cooling wage growth and a steady jobless rate would prompt expectations of interest rate cuts by the Bank of England (BoE) in the near term.
- For more cues on the UK’s interest rate outlook, investors will focus on the Consumer Price Index (CPI) data for December, which will be released on Wednesday. The UK CPI report is expected to show that price pressures remained broadly steady.
- Last week, BoE Monetary Policy Committee (MPC) member Alan Taylor stated that inflation could return to the central bank’s 2% target in mid-2026 more quickly than having to wait until 2027, and projected that interest rates could “normalise to the neutral sooner rather than later”. In the December meeting, the BoE guided that the monetary policy will remain on a “gradual downward path”.
- In the US, investors await Thursday's US Personal Consumption Expenditure Price Index (PCE) data for October and November, which is the Federal Reserve’s (Fed) preferred inflation gauge, to get fresh cues on the interest rate outlook.
- Currently, traders are confident that the Fed will leave interest rates unchanged in the monetary policy meeting later this month, according to the CME FedWatch tool.
Technical Analysis: GBP/USD sees more upside above 1.3500
GBP/USD rises to near 1.3480 as of writing. Price holds just above the 20-day Exponential Moving Average (EMA) at 1.3433, keeping the short-term bias supported. The 20-day EMA has flattened, indicating consolidation after the prior ascent.
The 14-day Relative Strength Index (RSI) at 57 (neutral) reflects balanced momentum with a positive tilt.
Measured from the 1.3789 high to the 1.3009 low, the 61.8% Fibonacci retracement at 1.3491 acts as resistance, but a daily close above the same could open a run toward the 78.6% retracement at 1.3622. On pullbacks, a close back below the 20-day EMA at 1.3433 would soften the tone and expose a deeper correction.
(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.
