The Pound Sterling (GBP) is currently facing pressure near 1.2400 against the US Dollar (USD) as the Federal Reserve signals fewer interest rate cuts this year. The US Dollar has extended its bull run, with the US Dollar Index (DXY) trading near a two-year high above 109.00. The lower US Initial Jobless Claims and optimism about the economic outlook under the incoming policies of President-elect Donald Trump have also contributed to the strength of the USD.
On the other hand, the GBP is being weighed down by weak data from the UK, including the S&P Global/CIPS Manufacturing PMI for December showing a contraction in the sector. The Bank of England (BoE) is expected to cut interest rates by 60 basis points this year, further adding to the pressure on the Pound Sterling.
From a technical analysis perspective, the GBP/USD pair remains bearish, with all short-to-long-term Exponential Moving Averages (EMAs) sloping downwards. The pair is expected to find support near the April 22 low at around 1.2300, while the psychological level of 1.2500 will act as key resistance.
The Pound Sterling is the oldest currency in the world and the official currency of the United Kingdom. It accounts for 12% of all foreign exchange transactions, with key trading pairs including GBP/USD, GBP/JPY, and EUR/GBP. The value of the GBP is heavily influenced by monetary policy decisions made by the Bank of England, which aims to achieve price stability through adjustments to interest rates.
Economic indicators such as GDP, Manufacturing and Services PMIs, and employment data can also impact the value of the Pound Sterling. A strong economy is typically positive for the GBP, as it attracts foreign investment and may lead to higher interest rates. Additionally, the Trade Balance indicator, which measures the difference between exports and imports, can also influence the value of the GBP based on demand for exports.
