The British pound (GBP) has continued its decline against the US dollar (USD) for a third consecutive day, trading close to 1.3450 during European hours on Thursday. The weakening of the GBP/USD pair comes as the US dollar remains strong, buoyed by unexpectedly robust ISM Services Purchasing Managers’ Index (PMI) data from December.
At this moment, the U.S. Dollar Index (DXY), which measures the dollar against six major currencies, is hovering near a four-week peak of 98.86, reached on Monday.
The ISM Services PMI increased to 54.4 in December from 52.6 in November, marking its highest point since October 2024, according to data released Wednesday. Interestingly, economists had anticipated a drop to 52.3. Additionally, subcomponents like the employment index and new orders index showed better performance than before.
Market analysts point out that the strong performance in the US services sector could reduce dovish expectations regarding the Federal Reserve’s policies. “Surging U.S. service prices complicate discussions about a Fed rate cut,” remarked analysts from ING.
Daily Digest Market Movers: This week’s UK economic calendar remains bright
- While sterling slipped against more stable currencies on Thursday, it gained ground versus riskier ones. The fluctuation in the UK currency seems primarily influenced by risk sentiment, considering a relatively weak UK economic calendar this week.
- Looking ahead, the UK jobs report for the three months ending in November, due early next week, is expected to be a major influence on the pound. Market watchers will closely examine these labor statistics to gauge potential shifts in the Bank of England’s (BOE) monetary policy.
- During its policy discussion in December, the Bank of England indicated that its monetary policy remained on a “moderately downward trajectory.”
- This week, the performance of the GBP/USD will also be closely tied to the December US non-farm payrolls (NFP) data, set to be released on Friday. Investors are keenly interested in this report for insights on possible directions for the Fed’s monetary policy, especially as the Fed had cut rates by 25 basis points three times in 2025 in response to worsening job market conditions.
- In anticipation of the U.S. NFP, Wednesday’s ADP employment report indicated a rebound in private employment with a gain of 41,000 jobs in December, following a reduction of 29,000 positions in November. Furthermore, according to the US JOLTS data, new job openings in November totaled 7,146,000, which fell short of the 7.6 million expected and also lower than the initial estimate of 7,449,000.
Technical analysis: GBP/USD falls near 20-day EMA
As it stands, GBP/USD is hovering around 1.3455. Prices are just above the rising 20-day exponential moving average (EMA) of 1.3443, which supports a short-term bullish bias. The EMA has shown a slight upward trend in recent trades.
The 14-day Relative Strength Index (RSI) has eased from the low 60s and sits at 54.51, indicating a neutral stance with bullish momentum slowing yet remaining above the midline.
Considering the range from the high of 1.3791 to the low of 1.3008, the 61.8% Fibonacci retracement at 1.3491 currently caps any upward movement. A breakthrough at this level could lead to a pullback toward the 78.6% Fibonacci retracement around 1.3623. On the flip side, a close below the 20-EMA at 1.3443 might stall any rallies and possibly lead to further declines toward the December 17 low and the 38.2% Fibonacci retracement around 1.3310.
(The technical analysis in this story includes insights from AI tools.)
