- GBP/USD hovers around 1.2570 amid thin holiday trading.
- The US Dollar Index (DXY) holds steady near 108.15 with minimal fluctuations.
- Expectations of gradual Fed rate cuts keep pressure on the Greenback.
The GBP/USD pair has risen modestly to 1.2550, with trading activity subdued ahead of the Christmas holidays. The pair remains in consolidation, experiencing minimal price movement as the market slows during the quiet holiday period. Similarly, the US Dollar Index (DXY) is largely flat, holding steady above 108.00 with little direction as traders await upcoming economic data.
The US Dollar maintains its strength, bolstered by expectations of a slower pace of interest rate cuts by the Federal Reserve in 2025. Fed officials have adopted a cautious stance, influenced by a slower-than-expected disinflationary process and uncertainty surrounding new policies under President-elect Donald Trump. The Fed’s latest projections suggest the federal funds rate could decline to 3.9% by the end of 2025, implying fewer rate cuts next year than previously anticipated.
On the economic front, Initial Jobless Claims data due Thursday is forecast to show a slight decline to 218K, potentially stirring some volatility for the US Dollar. Meanwhile, GBP/USD remains under pressure, having fallen below the key upward-sloping trendline at 1.2600. December’s US Nonfarm Payrolls, expected in early January, will also be a key focus for traders.
GBP/USD Technical Outlook
GBP/USD continues to face bearish momentum, with the Relative Strength Index (RSI) dipping below 40, signaling potential for further downside. The Moving Average Convergence Divergence (MACD) indicator also prints red bars, reflecting strong bearish pressure.
On the downside, the next key support for GBP/USD is near 1.2300, while on the upside, a recovery above 1.2600 could signal a reversal. This level will be critical to watch for any signs of renewed bullish momentum.
