GBP/USD jumped over 0.29% on Monday, with recent geopolitical events undoing earlier gains that stemmed from market nervousness. The currency pair bounced back from a daily low of 1.3413 and is now trading around 1.3500.
Sterling rises as sentiment improves; dollar falters amid disappointing US ISM data
The improved mood in the markets weakened the US dollar, as shown by the US dollar index (DXY), which tracks the currency’s performance against six others. The DXY dipped 0.03% to 98.39, after previously rising by 0.40% on the day.
US economic indicators revealed that business activity has contracted for the tenth month in a row as the ISM Manufacturing PMI dropped from 48.2 to 47.9, missing expectations of 48.3.
Although this PMI figure is the lowest since October 2024, it still sits above 42.3, a threshold that ISM associates with long-term economic growth. Additionally, the latest GDP data for December showed the US economy grew at an annualized rate of 4.3% in the third quarter.
Minneapolis Fed President Neel Kashkari remarked that “inflation is still too high.” He suggests that the Fed is nearing a neutral stance and noted that the job market has low hiring rates accompanied by equally low layoffs.
Geopolitical news over the weekend provided some support for the US dollar throughout much of the trading session in Asia and Europe. On Saturday, the US military reported allegations against Venezuelan President Nicolás Maduro and his wife, stating they have been involved in cocaine trafficking for over 25 years, associating with groups labeled as foreign terrorist organizations by the US.
Meanwhile, in the UK, money markets are predicting at least one interest rate cut by the Bank of England this year, with speculation of a second possible cut by the year’s end. Futures markets are currently pricing in a 41.3 basis point reduction ahead of the November 5, 2026, meeting, according to Capital Edge data.
Looking ahead, the UK’s economic data releases appear scant, in contrast to the US, which is entering a week full of important data. Traders are especially anticipating the ISM services PMI, new jobless claims for the week ending January 3, and December’s non-farm payrolls.
GBP/USD Price Prediction: Technical Outlook
Technical indicators for GBP/USD suggest that it might push past the December peak of 1.3534, paving the way for further increases. Should buyers surpass 1.3550, we could see a test of the 1.3600 level soon. On the flip side, if the pair drops under 1.3500, sellers might target the 200-day SMA at 1.3374, potentially pushing the exchange rate below 1.3400.
