The dollar weakened as tensions between the US and Europe pushed the pound higher against the dollar for the third consecutive day.
2026-01-21 14:04:14
The pound maintained its upward momentum against the dollar during Wednesday's Asian trading session, trading around 1.3430, marking its third consecutive day of positive gains.
Recent UK employment data has provided support for the pound: employment increased by 82,000 in three months, reversing the decline of 17,000 in the previous period; average wages (excluding bonuses) rose by 4.5% year-on-year, while average wages including bonuses rose by 4.7% year-on-year.
Despite the unemployment rate remaining at 5.1%, slightly higher than market expectations, overall employment improvement has strengthened market confidence in the pound. The market will now focus on the UK's December CPI, PPI, and retail price index data, which could provide new drivers for exchange rate volatility.
The US dollar was pressured by ongoing tensions in US-EU relations surrounding the Greenland dispute. US President Trump reiterated his "no-turn-back" stance on the Greenland acquisition plan and threatened new 10% tariffs on eight European countries, while also threatening 200% tariffs on French President Macron for not joining his "Peace Committee."
These policy moves have exacerbated market concerns about a global economic slowdown, weakening the dollar's appeal as a safe-haven currency. Furthermore, the European Parliament plans to suspend ratification of the July-reached US-EU trade agreement and will formally announce its decision this Wednesday in Strasbourg, France.
Further tensions between the US and Europe could fuel market expectations of downward pressure on the dollar, while simultaneously supporting the pound's continued recent gains against the dollar.
From a technical perspective, GBP/USD found support near short-term moving averages, and the bullish trend remains stable. If UK economic data continues to improve, the pound is expected to continue rising, but political and trade uncertainties between the US and Europe may still lead to increased short-term volatility.
"Improved employment data provided short-term support for the pound, but the dollar was pressured by tensions between the US and Europe and tariff threats, allowing GBP/USD to continue its upward trend." — Market analyst
Editor's Note:
The recent performance of GBP/USD reflects the combined effects of fundamentals and geopolitical risks. Improved UK employment has provided strong support for the pound, while the dollar is under pressure due to US-EU tensions, creating room for short-term gains.
However, the market still needs to pay attention to the upcoming UK CPI, PPI and retail price data, as well as the potential impact of the development of US-EU relations on the US dollar.
Recent UK employment data has provided support for the pound: employment increased by 82,000 in three months, reversing the decline of 17,000 in the previous period; average wages (excluding bonuses) rose by 4.5% year-on-year, while average wages including bonuses rose by 4.7% year-on-year.
Despite the unemployment rate remaining at 5.1%, slightly higher than market expectations, overall employment improvement has strengthened market confidence in the pound. The market will now focus on the UK's December CPI, PPI, and retail price index data, which could provide new drivers for exchange rate volatility.
The US dollar was pressured by ongoing tensions in US-EU relations surrounding the Greenland dispute. US President Trump reiterated his "no-turn-back" stance on the Greenland acquisition plan and threatened new 10% tariffs on eight European countries, while also threatening 200% tariffs on French President Macron for not joining his "Peace Committee."These policy moves have exacerbated market concerns about a global economic slowdown, weakening the dollar's appeal as a safe-haven currency. Furthermore, the European Parliament plans to suspend ratification of the July-reached US-EU trade agreement and will formally announce its decision this Wednesday in Strasbourg, France.
Further tensions between the US and Europe could fuel market expectations of downward pressure on the dollar, while simultaneously supporting the pound's continued recent gains against the dollar.
From a technical perspective, GBP/USD found support near short-term moving averages, and the bullish trend remains stable. If UK economic data continues to improve, the pound is expected to continue rising, but political and trade uncertainties between the US and Europe may still lead to increased short-term volatility.
"Improved employment data provided short-term support for the pound, but the dollar was pressured by tensions between the US and Europe and tariff threats, allowing GBP/USD to continue its upward trend." — Market analyst
Editor's Note:
The recent performance of GBP/USD reflects the combined effects of fundamentals and geopolitical risks. Improved UK employment has provided strong support for the pound, while the dollar is under pressure due to US-EU tensions, creating room for short-term gains.
However, the market still needs to pay attention to the upcoming UK CPI, PPI and retail price data, as well as the potential impact of the development of US-EU relations on the US dollar.
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