GBP/USD surged above 1.34, with market focus on the Bank of England.
2025-12-16 19:40:23
On Tuesday (December 16), the GBP/USD pair showed a rapid upward surge, breaking through the previous trading range, indicating strong short-term bullish momentum. The pair was trading at 1.3418/19, up 0.34%.
The combined impact of the US non-farm payroll report and the Bank of England's interest rate decision has brought the GBP/USD exchange rate forecast into sharp focus as 2025 draws to a close. Multiple signs of weakness in the UK economy have led to strong market expectations of a Bank of England rate cut this week, with Wednesday's CPI data potentially becoming the final variable influencing that decision.
This week's economic data calendar is packed. The previously released New York Fed Manufacturing Index came in at -3.9, far below the expected +9.8 and the previous reading of 18.7. This data put pressure on the US dollar, pushing the GBP/USD exchange rate above the 1.34 level. However, subsequent economic data releases this week will have a more significant impact on the pair's movement.
Will the US dollar rebound?
The US dollar started the year slightly weaker, continuing its decline from last week. This followed the Federal Reserve signaling further interest rate cuts, while the market increasingly believes that if the global economy continues to stabilize, central banks in other economies may begin a rate hike cycle.
Domestically in the US, this week is packed with economic data releases and speeches from Federal Reserve officials. The most anticipated is Tuesday's November non-farm payrolls report. The market expects a modest increase of around 50,000 jobs, with the unemployment rate rising slightly to 4.5%. If the data falls short of expectations, it could prompt the market to pre-emptively bet on a Fed rate cut; conversely, strong data could drive a significant rise in the US dollar.
The November Consumer Price Index (CPI) released on Thursday is also worth watching, with the market expecting the overall inflation rate to rise slightly year-on-year to 3.1%. In addition to economic data, comments from Federal Reserve officials will also influence the GBP/USD exchange rate forecast. New York Fed President John Williams is scheduled to speak later on Monday; on Wednesday, Fed Governor Chris Waller and other officials will also share their views on the economic outlook.
Market focus is on the Bank of England, with expectations of an interest rate cut dominating sentiment.
Besides the US, central banks in several other countries, including the Eurozone, Japan, and the UK, will hold policy meetings this week. For GBP/USD traders, the biggest risk event may come from the Bank of England's interest rate decision on Thursday, as the pound has already depreciated in tandem with the dollar earlier this week.
The pound weakened after the UK released weaker-than-expected October GDP data last week. Recent declines in UK inflation, weakening economic growth, and easing labor market conditions have provided ample justification for another interest rate cut by the Bank of England this week. These factors could even have prompted Bank of England Governor Andrew Bailey, a key swing voter in policy, to support this week's rate cut decision. Meanwhile, the pound's rebound following last month's budget announcement appears to have ended, further solidifying the pound's weakness.
Ahead of the Bank of England's interest rate decision, the market will also see UK labor market data and the November Consumer Price Index (CPI). The market expects overall UK inflation to decline slightly, but core inflation and services inflation to remain sticking together. For current expectations of an interest rate cut, Wednesday's November CPI data is the last potential obstacle – given the backdrop of slowing UK economic growth and a loose labor market, unless the inflation data shows a significantly stronger-than-expected increase, it will be difficult to change the Bank of England's established trajectory of cutting interest rates this week.
Current market pricing indicates an 85% probability of a Bank of England rate cut this Thursday, making it virtually a certainty. The market expects Governor Andrew Bailey to announce a reduction in the benchmark interest rate to 3.75% by a narrow 5-4 vote. In addition, the market will closely watch its forward guidance on monetary policy for 2026, with current expectations suggesting a cumulative rate cut of 50 basis points next year. A stronger easing signal could trigger a significant drop in the pound/dollar exchange rate.
Technical Analysis
From a technical analysis perspective, the GBP/USD exchange rate has been trading within a range for most of the second half of this year. Recently, the exchange rate has continued to rise, breaking through several short-term technical resistance levels and moving averages. However, it has encountered key resistance near the 1.3400 level, and some selling pressure is expected at this level before the macroeconomic events of this week are finalized.
The GBP/USD exchange rate is currently trading within an ascending triangle pattern, with downside risks gradually accumulating. If the 1.3350 support level is decisively broken, the exchange rate may further decline, with subsequent support levels at 1.3220 and 1.3100. If selling pressure continues to intensify, the key psychological level of 1.3000 may be tested.
On the upside, the exchange rate has reached the key level of 1.3400, with the next resistance level pointing to 1.3500.
The combined impact of the US non-farm payroll report and the Bank of England's interest rate decision has brought the GBP/USD exchange rate forecast into sharp focus as 2025 draws to a close. Multiple signs of weakness in the UK economy have led to strong market expectations of a Bank of England rate cut this week, with Wednesday's CPI data potentially becoming the final variable influencing that decision.
This week's economic data calendar is packed. The previously released New York Fed Manufacturing Index came in at -3.9, far below the expected +9.8 and the previous reading of 18.7. This data put pressure on the US dollar, pushing the GBP/USD exchange rate above the 1.34 level. However, subsequent economic data releases this week will have a more significant impact on the pair's movement.
Will the US dollar rebound?
The US dollar started the year slightly weaker, continuing its decline from last week. This followed the Federal Reserve signaling further interest rate cuts, while the market increasingly believes that if the global economy continues to stabilize, central banks in other economies may begin a rate hike cycle.
Domestically in the US, this week is packed with economic data releases and speeches from Federal Reserve officials. The most anticipated is Tuesday's November non-farm payrolls report. The market expects a modest increase of around 50,000 jobs, with the unemployment rate rising slightly to 4.5%. If the data falls short of expectations, it could prompt the market to pre-emptively bet on a Fed rate cut; conversely, strong data could drive a significant rise in the US dollar.
The November Consumer Price Index (CPI) released on Thursday is also worth watching, with the market expecting the overall inflation rate to rise slightly year-on-year to 3.1%. In addition to economic data, comments from Federal Reserve officials will also influence the GBP/USD exchange rate forecast. New York Fed President John Williams is scheduled to speak later on Monday; on Wednesday, Fed Governor Chris Waller and other officials will also share their views on the economic outlook.
Market focus is on the Bank of England, with expectations of an interest rate cut dominating sentiment.
Besides the US, central banks in several other countries, including the Eurozone, Japan, and the UK, will hold policy meetings this week. For GBP/USD traders, the biggest risk event may come from the Bank of England's interest rate decision on Thursday, as the pound has already depreciated in tandem with the dollar earlier this week.
The pound weakened after the UK released weaker-than-expected October GDP data last week. Recent declines in UK inflation, weakening economic growth, and easing labor market conditions have provided ample justification for another interest rate cut by the Bank of England this week. These factors could even have prompted Bank of England Governor Andrew Bailey, a key swing voter in policy, to support this week's rate cut decision. Meanwhile, the pound's rebound following last month's budget announcement appears to have ended, further solidifying the pound's weakness.
Ahead of the Bank of England's interest rate decision, the market will also see UK labor market data and the November Consumer Price Index (CPI). The market expects overall UK inflation to decline slightly, but core inflation and services inflation to remain sticking together. For current expectations of an interest rate cut, Wednesday's November CPI data is the last potential obstacle – given the backdrop of slowing UK economic growth and a loose labor market, unless the inflation data shows a significantly stronger-than-expected increase, it will be difficult to change the Bank of England's established trajectory of cutting interest rates this week.
Current market pricing indicates an 85% probability of a Bank of England rate cut this Thursday, making it virtually a certainty. The market expects Governor Andrew Bailey to announce a reduction in the benchmark interest rate to 3.75% by a narrow 5-4 vote. In addition, the market will closely watch its forward guidance on monetary policy for 2026, with current expectations suggesting a cumulative rate cut of 50 basis points next year. A stronger easing signal could trigger a significant drop in the pound/dollar exchange rate.
Technical Analysis
From a technical analysis perspective, the GBP/USD exchange rate has been trading within a range for most of the second half of this year. Recently, the exchange rate has continued to rise, breaking through several short-term technical resistance levels and moving averages. However, it has encountered key resistance near the 1.3400 level, and some selling pressure is expected at this level before the macroeconomic events of this week are finalized.
The GBP/USD exchange rate is currently trading within an ascending triangle pattern, with downside risks gradually accumulating. If the 1.3350 support level is decisively broken, the exchange rate may further decline, with subsequent support levels at 1.3220 and 1.3100. If selling pressure continues to intensify, the key psychological level of 1.3000 may be tested.
On the upside, the exchange rate has reached the key level of 1.3400, with the next resistance level pointing to 1.3500.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
