Created on January 16, 2025

• Bulls haven’t enjoyed the recent rebound gains for long in the GBP/USD pair, which reached the resistance level of 1.2305.
• We had recommended selling the GBP/USD pair above that peak through our free direct trading signals on our website.
• Obviously, this was before it quickly returned in its broader downward path with losses to the support level of 1.2186 before settling around the level of 1.2240 at the beginning of trading on Thursday.
• Ahead of a package of important economic releases from both Britain and the United States of America, the results of which may shape the closing of trading for the currency pair this week.

US Dollar Price Affected by Inflation Figures

According to Forex trading, dollar bulls needed an inflation reading that exceeded consensus to maintain their momentum, but they received news of an unexpected slowdown in core US inflation. The US dollar had retreated after the US core consumer price index (CPI) fell to 3.2% year-on-year from 3.3% (exp: 3.3%), marking the first decline since July. Overall, US core inflation, which consists of core inflation minus rents, remains elevated but is still trending down. Also, reported was that core consumer price inflation rose to 2.9% year-on-year in December from 2.7%, which was in line with expectations and helped to bolster expectations for a rate cut in June.

Expectations for US Federal Reserve Policies

Influenced by the announcement of US inflation figures, US Treasury yields declined, stocks rose, and money market prices showed that traders had increased their bets on the next US interest rate cut by the Federal Reserve in June, with a possible second cut in the second half of 2025. Overall, the data comes amid signs that the US dollar is at a peak and is trading above its fundamental drivers. This overvalued assessment was driven by a series of US economic data that came in above consensus, which now leaves room for further upside at a particularly high level. Consequently, this makes the US dollar vulnerable to data releases that meet or fall short of expectations.

According to reliable trading platforms, the US Dollar Index – a measure of the US dollar’s strength against a basket of currencies – is now more than 25% above its 25-year average and at a level we have only seen briefly since the 1980s. According to Forex analysts at Societe Generale, the overvalued US dollar assessment seems to reflect the policies of incoming US President Donald Trump that are leading the market. Furthermore, the risk is that what he offers fails to meet expectations.

However, there is also limited scope for significant US interest rate cuts, given the strength of the US economy, suggesting that a defeat for the dollar is unlikely either.

Trading Tips:

Dear TradersUp follower, the British financial crisis will remain a negative pressure factor for investor sentiment towards the British pound in the coming period, threatening any gains against the US dollar and other major currencies.

Technical Analysis for the GPB/USD pair today:

Dear reader, according to trading on the daily chart, the general trend of the GBP/USD pair is still bearish. As mentioned before, we expected that the gains of the GBP/USD pair will remain vulnerable to a rapid collapse. Furthermore, we still prefer to sell the GBP/USD from every upward level. Currently, the closest resistance levels for the currency pair are 1.2330, 1.2420, and 1.2500, respectively. The technical indicators, the Relative Strength Index and the MACD, are still bearish.

Today, the pound will be affected by the announcement of the British economic growth reading and the industrial sector. The US dollar will be affected by the announcement of US retail sales figures, weekly jobless claims and the Philadelphia Fed manufacturing index.

Ready to trade our daily Forex forecast? Here’s a list of some of the top forex brokers UK to check out.

FTSE rises as the pound sinks and growth stalls

• UK GDP stalls at 0.1% vs 0.2% expected
• GBP/USD falls below 1.22
• Miners led the index higher, tracking iron ore prices higher
• FTSE breaks out of range

The FTSE 100 has risen to an over five-week high after weak GDP data sent the pound lower.

UK GDP figures showed that the UK economy grew 0.1% in November, slower than the 0.2% forecast. However, this is up slightly from the 0.1% decline in output in October and September. The data confirms that growth momentum in the UK has cooled since labour came to power and confirms the country is stuck in a stagflation trap.

Following the data, the pound has fallen back below 1.22, paring yesterday’s gains following cooler UK and US inflation data. The weaker pound, owing to the more beneficial exchange rate, helps to boost the multinationals which make up around 80% of the FTSE.

Mining stocks are leading the gains, boosted by a rebound in iron ore prices and a rally in gold following yesterday’s US inflation data, which increased hopes of a further Fed rate cut this year.

In corporate news, Antofagasta is up 2.9% after posting higher copper and gold production in Q4, while Rio shares have climbed as the company reaffirmed its outlook and announced increased copper output.

Taylor Wimpey is leading the losses, down over 3%, after reporting UK home sales near the top end of guidance, but flagged growing costs.

Looking ahead, attention will turn to US jobless claims and retail sales later today for further clues over the health of the US economy and the outlook for Fed rate cuts.

FTSE forecast – technical analysis

The FTSE 100 has traded within a holding pattern since May last year. More recently the price has extended its recovery from 8000, rising above the 200 SMA at 8225 and has broken above 8325, the level that has capped gains for much of the past 9-months.

Buyers supported by the bullish breakout and the RSI above 50 will look to extend gains towards 8400 and 8480 to fresh record highs.

Support is seen at 8325. A break below here takes the price back into the holding channel and exposes the 200 SMA at 8225. Below here, 8150 comes into focus ahead of 8000.

EUR/USD holds below 1.03 ahead of ECB minutes, US retail sales & jobless claims

• German CPI was revised higher to 0.5% MoM
• US retail sales are forecast to rise 0.6%
• EUR/USD remains in a downward channel

EUR/USD is holding steady below 1.03 after modest losses yesterday amid ongoing concerns surrounding the Eurozone’s economic outlook. Dovish ECB commentary reinforces the expectations of further rate cuts while the USD rises versus major peers.

The euro is finding some support from an upward revision to German inflation, which rose 0.5% MoM in December, while core CPI rose 3.3%, up from 3%.  However, the data raises stagflation concerns for the eurozone’s largest economy and reaffirms expectations of further rate cuts by the ECB.

ECB policymakers have remained dovish. This week, Finland governor Olli Rhen commented that he sees monetary policy leaving restrictive territory, most likely by midsummer. While ECB’s Philip Lane warned over keeping rates too restrictive for too long.

Attention now turns to ECB minutes, which could provide further clues about the outlook for rate cuts this year. eBay is expected to cut rates by 25 basis points at the end of this month, and three more rate cuts are expected this year.

The USD is steadying after losses versus its major peers yesterday after cooling US core inflation and falling bond yields pulled the currency lower.

US core inflation was 0.2% month on month in December down from 0.3% and annualised core inflation eased to 3.2% below the three-point 3% expected. Attention now turns to a slew of U.S. data, including jobless claims and retail sales. Solid numbers could highlight the strength of the US economy and lift the US dollar higher.

EUR/USD forecast – technical analysis

EUR/USD has been in a downward trend since September, forming a series of lower highs and lower lows before running into support at 1.0180.

The pair remains vulnerable as the bearish trend persists and the RSI is below 50. Sellers will look to take out 1.0180 support to extend losses towards parity.

Meanwhile, buyers could be encouraged by the hammer candlestick on January 13 which could point to a bullish reversal. Buyers would need to rise above 1.0330, the November low, and 1.0460 to negate the near-term downtrend. A rise above 1.0630 the December high, creates a higher high.