Pound Sterling holds onto Fed-related gains against US Dollar

The Pound Sterling (GBP) trades close to a fresh seven-week high around 1.3400 against the US Dollar (USD) on Thursday. The GBP/USD pair trades firmly as the US Dollar struggles to gain ground following the Federal Reserve’s (Fed) rate cut on Wednesday.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades vulnerably near a seven-week low of 98.54 posted earlier in the day.

On Wednesday, the Fed lowered the Federal Fund Rate by 25 basis points (bps) to 3.50%-3.75%, as expected, and the dot plot signaled that there will be one interest rate cut in 2026.

The US Dollar has come under pressure as the cautious guidance from the Fed was also accompanied by several dovish elements, notably a lower revision in inflation expectations and a note in the statement about the recent uptick in unemployment. Regarding price rises, the Fed projected that “goods inflation would peak in Q1, if there were no new tariff announcements”.

Before the policy outcome, investors anticipated that the Fed would announce a halt in the monetary expansion cycle after a 25-bps interest rate reduction, as inflation had remained well above the 2% target for a long period.

However, Fed Chair Jerome Powell also gave some hawkish-leaning comments, stating that “the bar for further interest rate cuts is very high,” and the central bank is “well positioned to wait to see how the economy evolves”.

Daily digest market movers: Pound Sterling to be influenced by UK monthly GDP data

• The Pound Sterling trades mildly lower against its major peers, except antipodeans, on Thursday, broadly holding the gains after the Fed rate cut, as investors prepare for the release of key United Kingdom (UK) economic data before the Bank of England (BoE) decision next week.
• From Friday to until the BoE decides next Thursday, the UK's Office for National Statistics (ONS) will release monthly Gross Domestic Product (GDP) data for October, labour market data for the three months ending October, and the Consumer Price Index (CPI) data for November.
• On Friday, investors will pay close attention to the UK GDP report, which is expected to show that the economy expanded by 0.1% after contracting at a similar pace a month earlier. A good performance of the economy at the start of the fourth quarter would fuel optimism on the growth outlook at a time when the UK’s fiscal watchdog has raised the country's GDP projections for the current year to 1.5% from the 1.0% estimated in March.
• Within the GDP data, investors will also focus on the Manufacturing and Industrial Production data. On a monthly basis, both economic indicators are expected to come in higher due to the low base effect.
• On the monetary front, traders are increasingly confident that the Bank of England (BoE) will cut interest rates by 25 basis points (bps) to 3.75% next week amid weak job market conditions.
• In Thursday’s session, the GBP/USD pair will be influenced by the US Initial Jobless Claims data for the week ending December 5, to be released at 13:30 GMT. The number of individuals claiming jobless benefits for the first time is expected to come in at 220K, higher than the prior reading of 191K.

Technical Analysis: GBP/USD sees more upside as 20-day EMA slopes higher

The Pound Sterling trades firmly at 1.3370 against the US Dollar on Thursday. The GBP/USD pair holds above the rising 20-day Exponential Moving Average (EMA) at 1.3266, which has turned higher and supports the uptrend. Pullbacks would be expected to find demand near this key level.

The 14-day Relative Strength Index (RSI) at 63 (bullish) eases slightly from recent highs but keeps momentum positive.

As long as the pair remains above the 20-day EMA at 1.3266, bulls could extend the advance towards the October 17 high of 1.3471, while a daily close below that EMA would shift the bias to neutral and might push the pair lower to the November 25 low around 1.3100.

(The technical analysis of this story was written with the help of an AI tool.)