- GBP/USD is trading around 1.2570 with stocks trading lower than at the weekend.
- The US dollar index DXY was little changed and was steady around 108.15.
- Expectations that the Fed will cut interest rates put pressure on the dollar.
GBP/USD is trading slightly higher at 1.2550 this week due to the approaching Christmas holiday. The pair has gained minimally as the market transitions to a quieter holiday season. Similarly, the US Dollar Index (DXY) was largely flat, trading above 108.00, with no significant changes as traders await further economic data.
More broadly, the US dollar remains strong. Expectations that the Fed will slow rate cuts next year continue to support the dollar. US Federal Reserve (Fed) officials said they will take a more cautious approach to rate cuts, citing a weaker-than-expected rate cut and policy uncertainty under President Donald Trump. The Fed’s latest forecast suggests the federal budget deficit could fall to 3.9% by the end of 2025. This suggests further rate cuts next year, but less than previous market expectations.
Initial jobless claims are due on Thursday in the economic report, with new claims expected to fall slightly to 218,000. This could cause some volatility in the US dollar. But despite these conditions, the pound remains fragile, having fallen below key levels near 1.2600 and showing signs of further declines. December nonfarm payouts data will then be closely followed in the first week of January.
GBP/USD Market Analysis
The GBP/USD pair continues to decline. The Relative Strength Index (RSI) has also fallen below 40.00, and if it remains below this level, the risk of further declines increases. Also, the Moving Average Convergence Divergence (MACD) is showing red lines, which is a strong indicator for the bears. In the upward movement, there is a possibility of recovery if the pair recaptures the 1.2600 level, which will be the key point to watch for possible increases.
