Pound Sterling continues to weaken versus the US Dollar as attention turns to the US Non-Farm Payrolls.

Pound Sterling Weakens for Third Straight Day Against US Dollar

The British Pound (GBP) continued its downward trend against the US Dollar (USD) for a third consecutive session, hovering near 1.3450 during Thursday's European trading hours. GBP/USD remains under downward pressure as the US Dollar stays strong, buoyed by robust US ISM Services PMI data for December that exceeded expectations.

Currently, the US Dollar Index (DXY), which measures the Dollar's performance against a basket of six major currencies, is trading close to its four-week peak of 98.86, last reached on Monday.

Data released on Wednesday revealed that the ISM Services PMI climbed to 54.4 in December, up from 52.6 in November, marking the highest reading since October 2024. This result surpassed economists' forecasts of 52.3. Additionally, key components of the Services PMI, including the Employment Index and New Orders Index, also posted stronger figures compared to previous months.

According to market analysts, the unexpectedly strong US Services PMI may dampen expectations for a dovish shift by the Federal Reserve. ING analysts commented that "the surge in US services activity complicates the narrative for Fed rate cuts."

Market Sentiment Continues to Steer Pound Sterling

• On Thursday, the Pound traded lower against traditional safe-haven currencies, but outperformed more volatile counterparts. The currency's movement has largely been influenced by global risk sentiment, especially during a quiet week for UK economic data.
• Looking ahead, the upcoming UK employment report for the three months ending in November, due early next week, is expected to be a key driver for the Pound. Investors are closely monitoring labor market figures, as these will shape expectations for the Bank of England’s (BoE) policy direction.
• During its December meeting, the BoE signaled that monetary policy would continue on a "gradual downward trajectory."
• This week, GBP/USD will also be affected by the release of US Nonfarm Payrolls (NFP) data for December, scheduled for Friday. Market participants are watching this closely for fresh insights into the Federal Reserve’s policy outlook. In 2025, the Fed enacted three 25 basis point rate cuts to address a softening job market.
• Prior to the NFP release, Wednesday’s ADP Employment Change report indicated that private sector jobs increased by 41,000 in December, following a reduction of 29,000 in November. Meanwhile, the US JOLTS Job Openings report showed 7.146 million new positions in November, falling short of both the 7.6 million forecast and the previous reading of 7.449 million.

GBP/USD Technical Overview: Approaching 20-Day EMA

At the time of writing, GBP/USD is trading slightly lower near 1.3455, just above the rising 20-day Exponential Moving Average (EMA) at 1.3443, which continues to provide short-term support. The 20-day EMA has been trending upward in recent sessions, reinforcing a positive bias.

The 14-day Relative Strength Index (RSI) stands at 54.51, indicating neutral momentum after retreating from the upper 60s. While bullish momentum has eased, the RSI remains above the midpoint.

From the swing high of 1.3791 to the low of 1.3008, the 61.8% Fibonacci retracement at 1.3491 is currently limiting further gains. A decisive move above this level could pave the way for a rally toward the 78.6% retracement at 1.3623. On the downside, a close below the 20-day EMA at 1.3443 may halt the advance and trigger a deeper pullback toward the December 17 low and the 38.2% Fibonacci retracement near 1.3310.

(This technical analysis was prepared with the assistance of AI tools.)