– Written by


Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Advances as Dollar Falters on Tariff Threats

The Pound to US Dollar exchange rate (GBP/USD) pushed higher on Tuesday, touching a one-week peak amid escalating tariff concerns linked to Greenland and a mixed UK labour market report.

At the time of writing, GBP/USD was trading at $1.3450, up approximately 0.2% on the session, although it had slipped back slightly from earlier highs.

The US Dollar (USD) struggled to find support as renewed tariff warnings from President Donald Trump weighed on the American currency.

Trump signalled his intention to impose new trade levies on eight European countries opposing his proposed acquisition of Greenland, sharpening tensions between the US and several long-standing allies.

The prospect of a broader US-EU trade dispute unsettled markets, with investors increasingly uneasy about the potential drag on US growth and the risk that European governments could curb their holdings of US Treasuries.

These concerns lingered into the session as Trump doubled down on his position, brushing aside diplomatic criticism from European leaders and keeping the ‘Greenback’ under pressure.

Meanwhile, the Pound (GBP) advanced against the US Dollar as markets took a broadly constructive view of the UK’s latest labour market data, despite the figures offering a mixed picture.

Employment rose by 82,000 in the three months to November, comfortably beating expectations for a 27,000 increase. However, the unemployment rate remained stuck at a multi-year high of 5.1%.

Wage growth continued to cool, although pay increases still outpaced inflation.

Taken together, the data proved sufficient to underpin Sterling on Tuesday, allowing the Pound to gain ground against a weaker US Dollar.

GBP/USD Outlook: UK Inflation Data in Focus

Looking ahead, attention is likely to turn to the UK’s forthcoming consumer price index release, which could shape near-term direction in the Pound to US Dollar exchange rate.

Markets expect headline inflation to have edged higher in December, rising from 3.2% to 3.3%, while core inflation is forecast to have held steady at 3.2%.

If inflation proves stubborn, traders may scale back expectations for a near-term Bank of England rate cut, potentially offering Sterling further support. Conversely, any downside surprise could revive dovish expectations and place the Pound under renewed pressure.

For the US Dollar, the data calendar remains light, leaving USD sentiment closely tied to political developments.

Continued focus on President Trump’s tariff threats and rhetoric surrounding Greenland may sustain a broader ‘sell-America’ tone, keeping the ‘Greenback’ on the defensive.

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Created on January 20, 2026

The US dollar initially fell against the Japanese yen on Monday as traders ran to safety during Asian trading. However, cooler heads have prevailed.

The US dollar initially fell against the Japanese yen on Monday as everybody lost their minds about the latest comments coming out of Donald Trump and the European Union, suggesting that the trade deal between the US and the EU was over.

This had people running to safety. The US dollar sold off against multiple currencies around the world, and it does make a certain amount of sense that people ran to the Yen, but the reality is this is an ongoing game that we’ve been playing for months, and I think traders have realized that this is just more of the same. Nothing has actually changed. So what if there’s no trade agreement between the United States and the European Union? That was how we functioned for several months, and the world didn’t fall apart.

The Bank of Japan does have a meeting this week, and that’s something to pay attention to, but at the end of the day, the Japanese can only raise rates so high. Their bond market is already doing it for them, and it’s causing some pain. The Yen could very well find its way to the 160 level against the US dollar, maybe even higher than that. In fact, some pundits that I know are calling for something like 250 before this is all said and done.

Buyers Are Returning

Now that doesn’t mean it happens overnight, obviously it wouldn’t, but this little consolidation area that we had been in, we had broken out of, we pulled back to 158, and it looks like the buyers are returning.

Because of this, I like the idea of buying this pair. I think the 50-day EMA also confirms that there is support underneath. As far as this pair is concerned, you get paid at the end of every day, so you get to collect that interest rate differential and continue to ride the wave higher.

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Created on January 20, 2026

EUR/USD Analysis Summary Today

• Overall Trend: Bearish.
• Support Levels for EUR/USD Today: 1.1580 – 1.1520 – 1.1440.
• Resistance Levels for EUR/USD Today: 1.1680 – 1.1740 – 1.1800.

EUR/USD Trading Signals:

• Buy EUR/USD from the support level of 1.1560 with a target of 1.1800 and a stop-loss at 1.1470.
• Sell EUR/USD from the resistance level of 1.1730 with a target of 1.1500 and a stop-loss at 1.1800.

Technical Analysis of EUR/USD Today:

Concerns regarding Greenland have dominated Euro trading against other major currencies. This follows recent market anxiety over the future of U.S. Federal Reserve policies. According to performance data from trusted trading platforms, the EUR/USD price plummeted at the start of the trading week to the support level of 1.1576—the pair’s lowest level in nearly two months—before quickly rebounding to settle around the 1.1645 resistance level at the time of writing.

From a technical perspective, the EUR/USD bias remains bearish. It could quickly drop toward the psychological support level of 1.1500 in the coming days if fears of a persistent conflict between the U.S. and Europe intensify, especially following mutual threats of imposing tariffs. The 14-day RSI is reading around 45, supporting “bear” control, while the MACD signal lines remain steadily downward. Conversely, the psychological resistance at 1.1800 remains the key target to confirm a shift to a bullish trend.

For economic calender today, The euro’s price will be affected today by the release of the German Producer Price Index (PPI) at 9:00 AM Egypt time, followed by the Eurozone current account figures at 11:00 AM Egypt time. An hour later, the German ZEW index will be released. No major economic releases are expected from the US.

EUR/USD Exchange Rate and the Future of Fed Policies

The EUR/USD exchange rate has retreated from its recent highs, falling back toward 1.16 as investors grow cautious about the timing and scale of Fed interest rate cuts. While some banks still see room for the Euro to rise in the medium term, strong U.S. economic data and a strengthening Dollar have capped these gains for now. Increasingly, markets are focused on the Fed’s credibility and whether U.S. rates could remain high well into 2026.

EUR/USD Forecast for the Coming Days

In this regard, RBC Capital Markets expects the EUR/USD exchange rate to strengthen in 2026, but has lowered its year-end forecast to 1.20 from 1.24, now anticipating it will reach that level by the end of 2024. However, after a slight initial shift, ING still supports a rise to 1.22 by the end of 2026, driven by continued US interest rate hikes.

Overall, markets anticipate two US interest rate cuts by the Federal Reserve in 2026. Crédit Agricole expects the euro to depreciate further as the Fed resists further rate cuts: “We still expect interest rates to remain unchanged in January. After that, our current baseline forecast suggests the pause will extend throughout 2026, subject to the stability of the labor market in upcoming reports. Weaker-than-expected data would increase the risk of a shorter pause and/or greater monetary easing than we currently anticipate.”

Meanwhile, the independence of the US Federal Reserve will remain a pivotal issue for currency exchange rates.

Earlier this week, the Justice Department issued subpoenas against the Federal Reserve and its chairman, Jerome Powell, for alleged misconduct related to renovations at the Fed headquarters. Powell strongly rejected the move and defended the bank. MUFG commented on the development, stating, “The continued attacks on the Fed’s independence, in response to President Trump’s desire to lower interest rates, pose a downside risk to the US dollar and support our expectations of a decline.” The bank added, “However, this could backfire on President Trump if Fed officials maintain their stance and keep US interest rates unchanged, challenging the Fed’s continued independence in setting monetary policy.”

RBC Bank, for its part, still anticipates net losses for the dollar against the euro for three reasons: lower interest rates between the two countries, increased hedging against US assets, and a shift towards European assets and stronger growth in the Eurozone. RBC remains cautious about the potential for significant gains.

Trading advice:

We advise waiting for upcoming selling pressure on the EUR/USD. Obvioulsy, this will allow for “Buy” positions from the lowest possible prices. However, we strongly advise against over-leveraging or taking unnecessary risks.

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