GBP/USD under pressure: the British pound shows weakness today against solid dollar data

During Thursday’s European trading sessions, the British pound remains in a weak zone, trading near 1.3455 against the US dollar. This movement marks the third consecutive day of losses for the GBP/USD pair, reflecting the sustained strength of the dollar amid a more resilient macroeconomic outlook in the United States.

Dollar strength driven by stronger service data

The main source of this pressure is the behavior of the US dollar index (DXY), which is trading near 98.86, its highest in four weeks reached last Monday. This strength is directly related to December’s ISM Services PMI results, which positively surprised the market.

The indicator rose to 54.4 in December, compared to 52.6 in November, representing the highest reading since October 2024. Economists expected a reading of 52.3, so the current result exceeded projections. This rebound was supported by key components such as the employment index and new orders, both with stronger figures than in previous months.

Market analysts believe these unexpectedly strong results have significant implications for US monetary policy. As ING experts pointed out, “the rebound in US service activity complicates the narrative for Fed rate cuts.” This outlook reduces expectations for a more dovish shift by the Federal Reserve in the coming months.

The role of risk sentiment in the British pound

The British pound today also responds to broader global sentiment dynamics. During this session, the currency traded lower against safe-haven assets but improved against more volatile currencies. This behavior indicates that the direction of the GBP/USD pair is mainly guided by global risk cycles, especially in a week characterized by a reduced economic calendar for the UK.

Investors are now focusing on key UK indicators. The UK employment report for the quarter ending in November will be published in the coming days and will be decisive in setting expectations for Bank of England (BoE) policy. In its last December meeting, the BoE stated that monetary policy will follow a “gradual downward trajectory,” a message that the UK labor market could reinforce or modify.

Non-farm payrolls: the week’s catalyst

This Friday, the December (NFP) non-farm payrolls will be released, a data point that will draw market participants’ attention. Investors are looking for clear signals in this report regarding the Fed’s policy direction and the true state of the US labor market.

Before this key data, Wednesday revealed two preliminary indicators. The ADP employment change report showed an increase of 41,000 jobs in the private sector during December, a recovery from the decrease of 29,000 in November. Simultaneously, the JOLTS job openings registered 7.146 million available positions in November, below both the forecast of 7.6 million and the previous reading of 7.449 million. These mixed numbers generate uncertainty about the direction the final payrolls will take.

Technical analysis: GBP/USD at a critical zone

From a technical perspective, the GBP/USD pair approaches decisive levels. The 20-day (EMA) exponential moving average, located at 1.3443, continues to provide short-term support and maintains an upward trend, reinforcing a positive bias in the technical structure.

The 14-period (RSI) relative strength index is at 54.51, indicating neutral momentum after retreating from the over 60 zone. Although the bullish momentum has moderated, the RSI remains above the midpoint, maintaining possibilities for reactivation.

The 61.8% Fibonacci retracement, at 1.3491, acts as resistance that limits further gains in the short term. A decisive close above this level could facilitate an upward move toward the 78.6% retracement at 1.3623.

In the bearish scenario, a close below the 20-day EMA at 1.3443 could trigger a deeper correction, with targets at the December 17 low and the 38.2% Fibonacci retracement, both near 1.3310.

The British pound today is at a crossroads where US macroeconomic factors and local technical momentum will determine the next moves of the pair.