Pound Sterling continues to show weakness compared to the US Dollar

Pound Sterling Remains Subdued Near Four-Week Lows

The British Pound (GBP) is treading carefully, hovering close to its lowest point in four weeks around 1.3360 against the US Dollar (USD) during Friday's European session. The GBP/USD currency pair faces downward pressure as the US Dollar maintains its strength, supported by growing expectations that the Federal Reserve will refrain from further monetary easing at its upcoming policy meeting this month.

Currently, the US Dollar Index (DXY)—which measures the Dollar’s performance against a basket of six major currencies—remains elevated, holding near Thursday’s six-week peak of 99.50.

Market participants have largely factored in the likelihood that the Fed will keep interest rates unchanged within the 3.50%-3.75% range at the January meeting, according to data from the CME FedWatch tool.

Persistent inflationary pressures in the United States are fueling these expectations. On Thursday, Kansas City Fed Bank President Jeffrey Schmid remarked that monetary policy should remain “modestly restrictive” as inflation continues to run high.

Meanwhile, the Pound is expected to remain rangebound as investors await key economic indicators from the United Kingdom, including employment figures and Consumer Price Index (CPI) data, both due next week. These reports will be closely watched for insights into the Bank of England’s (BoE) future policy direction.

Technical Overview: GBP/USD

On the daily chart, GBP/USD is trading at 1.3384, positioned below the 20-day Exponential Moving Average (EMA) of 1.3428, which has started to slope downward and is limiting any recovery attempts.

The 14-day Relative Strength Index (RSI) stands at 46, indicating neutral momentum and remaining below the midpoint. The 50% Fibonacci retracement level, calculated from the 1.3793 high to the 1.3009 low, sits at 1.3401 and serves as immediate resistance. A daily close above this level could alleviate some of the bearish sentiment.

As long as the pair stays beneath the 20-EMA, the short-term outlook remains negative, with rallies likely to be capped by overhead resistance. Should buyers manage to push the price above the average on a daily closing basis, the next target would be the 61.8% retracement at 1.3494. However, failure to surpass these resistance levels would likely keep the pair in a consolidation phase below key barriers.

(This technical analysis was generated with assistance from an AI tool.)