GBP/USD Steady Amid Stronger USD
The GBP/USD pair struggled to capitalize on Friday’s modest recovery and oscillated in a range, above the 1.2400 mark at the start of a new week. Meanwhile, the spot prices remained close to the lowest level since April 2024 touched last week and seemed vulnerable to extend the three-month-long downtrend amid a stronger US Dollar (USD).
In fact, the USD Index (DXY), which tracks the greenback against a basket of major currencies, stood firm near two-year highs amid optimism over US President-elect Donald Trump’s expansionary policies and the Federal Reserve’s (Fed) hawkish outlook. Adding to this, concerns over Trump’s hefty tariffs, along with geopolitical risks emanating from the Russia-Ukraine war and rising tensions in the Middle East, underpinned the safe-haven dollar and acted as a headwind for the GBP/USD pair.
Meanwhile, sentiment surrounding the British Pound (GBP) remained subdued amid a recent batch of weak data from the UK and doubts about the newly elected Labour government’s fiscal strategy. Further, the Bank of England’s (BOE) relatively dovish stance and the split decision to leave interest rates unchanged in December might continue to weigh on the GBP. This validates the negative outlook for the GBP/USD pair as traders look forward to the latest UK Services PMI for a fresh impetus.
Later during the North American session, the US macro data – the latest Services PMI and Factory Orders – might influence the USD and contribute towards generating short-term opportunities. That said, the fundamental backdrop seems tilted in favor of the USD bulls and suggests that the path of least resistance for the GBP/USD pair is to the downside. However, investors might opt to wait for this week’s important US economic releases, including the crucial US Nonfarm Payrolls (NFP) on Friday.
Source: FXStreet
