GBP/USD Price Analysis: BoE Outlook and Weak Dollar Fuel Recovery Amid Risk-On Sentiment
The GBP/USD pair is trading at $1.25917, up 0.52%, reflecting a renewed positive tone as the British Pound continues to recover from last week’s losses.
The US Dollar Index (DXY) dropped by 0.5%, hovering near 107.00, as weaker sentiment around the US Dollar provided relief to the Pound. The market’s risk-on sentiment, coupled with favorable technical levels, has further bolstered GBP/USD momentum.
Technical indicators show that GBP/USD is holding above the pivot point of $1.26373, with immediate resistance at $1.26738 and further targets at $1.27143. On the downside, key support is noted at $1.25673, providing a safety net for any retracements.
US Dollar Weakens as Treasury Yields Drop, PMI Data Buoys GBP
The US Dollar softened on Monday after President-elect Donald Trump announced Scott Bessent as the new Treasury Secretary. The news prompted a decline in US 10-year Treasury yields to around 4.33%, easing the dollar’s upward pressure. Traders interpreted Bessent’s appointment as a stabilizing signal for Wall Street, focusing on tariff strategies and maintaining the Dollar’s reserve currency status.
Adding to the Dollar’s weakness was stronger-than-expected US economic data. November’s S&P Global Composite PMI surged to 55.3, marking the highest reading in 31 months. The services sector grew at a faster-than-expected pace, signaling improving economic resilience. Despite this, market participants remain divided on the Federal Reserve’s December decision, with 56% forecasting a 25-basis-point rate cut and 44% anticipating no change.
The weaker Dollar and upbeat US data allowed the Pound to capitalize on renewed momentum, pushing GBP/USD above the $1.2600 mark.
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BoE Caution and UK Economic Data Add Complexity to GBP Outlook
The British Pound faced headwinds last week, with October retail sales declining by 0.7% and November’s S&P Global/CIPS Composite PMI dropping below 50.0, signaling contraction in the UK’s manufacturing and services sectors. This weak data fueled concerns about the UK’s economic health.
However, the market expects the Bank of England (BoE) to adopt a cautious stance on monetary easing, which has provided a stabilizing effect on the Pound. Traders believe the BoE will maintain interest rates at 4.75% in December and may only lower rates gradually to 4% by 2025.
Looking ahead, GBP/USD traders will focus on speeches by BoE officials, including Clare Lombardelli and Swati Dhingra, for signals on future monetary policy.
GBP/USD Technical Analysis: Bullish Momentum Intact
Current Price: $1.25917, up 0.52%
Immediate Resistance: $1.26738, with further targets at $1.27143
Key Support Levels: $1.25673, $1.25394, and $1.25019
50 EMA: Positioned at $1.25830, reinforcing bullish sentiment
RSI: At 59, indicating room for further upward movement
GBP/USD continues to reflect bullish sentiment, holding above the pivot point and signaling potential for further gains. Traders should watch for a breakout above $1.26738 for continued upward momentum or a pullback to key support levels if resistance holds.
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