Image © Pound Sterling Live

Pound Sterling was unable to build a meaningful recovery, and risks are tilted lower this week, in which the Bank of England (BoE) dominates.

Our stance this December was that the pound to euro exchange rate (GBP/EUR) would deliver a year-end rally, offering euro buyers some tactical buying opportunities.

However, the euro has proven to be an outperformer amongst the world’s major currencies over the course of the past week, stymying GBP/EUR’s ambitions.

The pair peaked at 1.1463 last Tuesday and we were confident upside momentum was building as it had crossed the 55-day exponential moving average (EMA); typically a sign that an uptrend is building.

However, last Thursday’s 0.30% drop in GBP/EUR sliced through the 55-day and 21-day EMA, both of which are likely to act as resistance levels in the coming days.

Momentum is turning lower again and we are left considering the possibility that the year-end rally burned out before the mid-month mark.

Above: GBP/EUR at daily intervals.

Losses to 1.1360 are possible this week, ahead of a move back to 1.1320 support early in the new year.

The problem for those wanting a stronger pound is that fundamentals are pitted against it: the economic data has deteriorated, as confirmed by four successive months of no economic growth, and this is raising the odds of further BoE interest rate cuts.

This is unhelpful to sterling, given most G10 central banks have ended their rate cutting cycles and many are expected to raise interest rates at some point next year.

Image courtesy of Lloyds Bank

The BoE is almost certainly set to lower Bank Rate by 25 basis points on Thursday, meaning the decision itself won’t come as a surprise.

Instead, what will be of interest is how the Bank shapes expectations for what happens early next year.

Ahead of the decision, we will receive labour market and PMI data (Tuesday) and inflation numbers (Wednesday).

GBP/EUR Year-End 2025

Built from leading bank forecasts.

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The market is presently priced for one further BoE cut before April 2026, but if the data disappoints, more cuts will be built into the outlook, which would inevitably weigh on the pound.

“A BoE cut combined with the market adding to expectations of another cut in Q1 26 can weigh on the GBP,” says a note from TD Securities.

Economists look for the UK’s unemployment rate to rise to 5.1% when labour market statistics are released Tuesday, confirmation of an ongoing deterioration in the jobs market.

The Bank will believe it can address this by lowering rates, which would take pressure off households and businesses.

In short, if the data undershoots, the pound will sink to 1.1350 and lower.

However, lowering interest rates could prove risky if it stimulates inflation: Wednesday should see the ONS confirm inflation comes in at 3.6%, which is well ahead of the Bank’s 2.0% target.

If the data comes in ahead of expectations, we would expect pricing for further Bank rate cuts to halt and reverse, helping the pound recover.

A series of above-consensus data prints would help pound-euro recover back above 1.14 and restart the year-end rally.

But given the nature of survey data that showed the economy struggled ahead of the November budget, we see this as a lower probability outcome.

Created on December 15, 2025

• The US dollar strengthens against the Japanese yen as interest rate differentials continue to favor the United States.
• With Federal Reserve cuts uncertain and the Bank of Japan constrained, the pair appears supported, favoring dip-buying strategies.

The US dollar has rallied against the Japanese yen during the trading session on Friday as traders start to ask questions about whether or not the Federal Reserve is going to start cutting rapidly, or if it is a situation where they do not. And the FOMC statement, once you read into it and read the transcripts of the FOMC press conference, gives a little bit of hesitation to the idea that the Federal Reserve is just simply on autopilot.

Conversely, on the other side of the Pacific Ocean, we have the Bank of Japan, which is going to be in a situation where it is difficult to cut rates at least drastically. And therefore, the interest rate differential should continue to favor the United States, as it historically has for years, almost an entire career, and in fact probably even longer than that.

Defined Consolidation Range

So, with that being said, it makes a certain amount of sense that the US dollar is somewhat resilient against the yen. And now it looks a lot like a market that is trying to find some type of consolidation area. The consolidation area is an area that is presently defined with 158 yen being the ceiling and 155 yen being the first floor.

Underneath, we have another floor near the 153 yen level. And as long as we stay above there, I think you have a situation where you will be looking to buy dips. That does not mean that it is easy, and it does not mean that it is going to be a slam dunk, but I do recognize that finding value in this pair on dips and taking advantage of cheap US dollars probably remains the way to go forward.

I like the idea of buying dips as we had just seen and taking advantage of the interest rate differential, just simply holding on to the pair and collecting a little bit of profit at the end of every day, and riding the trend as it gains nominal gains, perhaps to the 158 yen level, maybe even higher than that. I have no interest in shorting as things stand right now.

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Created on December 15, 2025

EUR/USD Analysis Summary Today

• Overall Trend: : Within a technical correction upward.
• Support Levels for EUR/USD Today: 1.1690 – 1.1620 – 1.1540
• Resistance Levels for EUR/USD Today: : 1.1790 – 1.1830 – 1.1900

EUR/USD Trading Signals:

• Buy EUR/USD from the support level of 1.1640 with a target of 1.1850 and a stop-loss at 1.1580.
• Sell EUR/USD from the resistance level of 1.1810 with a target of 1.1500 and a stop-loss at 1.1900.

Technical Analysis of EUR/USD Today:

The EUR/USD pair continues to receive positive momentum from the divergence in the future policies of both the US Federal Reserve and the European Central Bank (ECB). Consequently, and according to reliable trading platforms, the Euro/Dollar price recently rose to the 1.1762 resistance level, the pair’s highest in two months, before settling around 1.1733 at the time of writing this analysis. This stability is in anticipation of the crucial reaction this week to the ECB’s policy announcement and the US jobs figures, the latter of which has been long-awaited due to the longest government shutdown in US history.

As is well known, US jobs figures and inflation levels are key factors influencing the Federal Reserve’s policy decisions at upcoming meetings.

Obviously, the technical indicators confirm an upward technical correction for the EUR/USD pair. As shown on the daily chart, the 14-day Relative Strength Index (RSI) has moved towards the 67 resistance level after recent gains, with the nearest point to the overbought line being 70.

Simultaneously, the MACD lines are steadily trending upwards, confirming the bulls’ readiness for further gains if the factors driving the currency’s price increase continue. Breaking above the psychological resistance level of 1.1800 remains crucial to confirming the overall trend shift and simultaneously supports the potential for a move towards the psychological resistance level of 1.2000, which has been identified as a target for trading in 2026.

A scenario for a EUR/USD decline on the same daily chart would require a return to the 1.1500 psychological support level. No major economic data releases are expected today, suggesting that the pair may trade within a narrow range around its current levels.

Trading Tips:

The EUR/USD pair is expected to remain within its recent range. Therefore, avoid placing trades within narrow price movements and wait for the reaction to this week’s key events to determine the most suitable buy or sell opportunities.

EUR/USD Forecast Versus Central Bank Policies

According to currency trading experts’ forecasts, the Euro/Dollar exchange rate will remain supported in this regard. As the new year’s trades approach, currency investors will continue to monitor this divergence. Currently, they are focused on reassessing the possibility that the ECB may become one of the few G10 central banks with serious indications of monetary policy tightening in 2026. This shift would carry positive, albeit limited, implications for the single European currency.

Currency analysts believe that signs of interest rate hikes are beginning to emerge in several G10 markets, supporting currencies like the Australian Dollar, New Zealand Dollar, and Swedish Krona. They predict that, in the baseline scenario, the ECB will keep its monetary policy unchanged in 2026. However, if the market starts pricing in a more hawkish scenario, the Euro price will clearly benefit.

Experts also indicate that financial markets quickly shifted from expecting rate cuts to tentatively pricing in rate hikes in 2026 for the Australian Dollar, New Zealand Dollar, Canadian Dollar, and Swedish Krona—dynamics that have already supported these currencies. As for the Euro, a rate cut has been almost entirely ruled out.

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Created on December 15, 2025

• The British pound shows signs of failure near 1.34 as interest rate expectations favor the US dollar.
• Price action suggests a potential grind lower unless a decisive breakout triggers broad-based dollar weakness.

The British pound initially tried to rally, but it failed a bit during the trading session on Friday. Ultimately, this is a market that continues to ask a lot of questions about the 1.34 level as a potential barrier and perhaps even a ceiling.

This is a market that is trying to figure out what to do with the idea of the Federal Reserve potentially being on hold next year, while the British are most certainly going to be cutting rates soon. A lot of what happens from here comes down to the reality that the interest rate differential will not have changed, and that has a lot to do with how this pair behaves.

It was somewhat odd that the pair sold the US dollar the way it did, because this is a market that looks to be in the process of retesting the previous selloff to see whether or not downward pressure continues. That does appear to be the case.

Key Levels and Downside Risk

If the market breaks down below the 50-day EMA and the 200-day EMA, there is a real chance of a much more significant breakdown. All things being equal, this looks more like a grind lower rather than an explosive move, although that possibility always exists.

On the other hand, if the market were to break above the 1.3450 level, this area on the chart opens the door to a strong move higher. That would align with a scenario in which the US dollar sells off broadly. It is important to pay close attention to that because when the dollar sells off, it typically does so against everything at the same time.

Ready to trade our daily GBP/USD Forex forecast? Here’s some of the best forex broker UK reviews to check out.

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

– Written by


Frank Davies

STORY LINK Euro to Dollar Forecast: EUR/USD Near 1.18 as Fed Uncertainty Dominates

The Euro to US Dollar exchange rate (EUR/USD) jumped to two-month highs above 1.1750 after the Federal Reserve delivered a widely expected rate cut but revealed deeper internal divisions.

Markets read the split vote and Powell’s data-dependent tone as a negative for the dollar, keeping the euro supported. Attention now turns to the Fed’s 2026 path and uncertainty over Powell’s successor.

EUR/USD Forecasts: Fed Dominates

Scotiabank forecasts Euro to Dollar (EUR/USD) exchange rate gains to 1.22 by the end of 2026 with a further advance to 1.24 the following year.

SocGen does see scope for EUR/USD gains to 1.20 early next year, but forecasts a steady retreat to 1.14 at the end of 2026.

EUR/USD jumped to 2-month highs above 1.1750 after the Federal Reserve policy decision before consolidating.

The Fed cut interest rates by a further 25 basis points to 3.75% at the latest policy meeting, in line with strong consensus forecasts, but divisions intensified.

There were three dissents against the decision with Schmid and Goolsbee wanting to leave rates on hold while Miran called for a 50 basis-point cut.

Chair Powell emphasised the difficulty in policymaking with higher inflation and weaker employment. He insisted that policy would be data dependent.

According to the latest updates, the median projection is for one further cut in 2026, although there was a wide divergence in forecasts.

Fed policy will remain a key element next year with Chair Powell’s term ending in May and there is a high degree of uncertainty.

Scotiabank commented; “The search for Powell’s successor remains another key risk for the USD, as the current top contender for the role is the dovish-leaning Hassett. Powell’s term (as Chair) officially ends in May, but President Trump has suggested that he could announce his choice as soon as January—setting off a sequence of events that would add significant pressure to the USD into the confirmation and arrival of a new Fed Chair.”

Scotiabank also sees scope for a relatively hawkish ECB stance which would underpin the Euro; “Policymakers had been offering subtle hints over the past few weeks, signaling concerns about upside risks to inflation within the context of an overall balanced outlook.”

Mizuho has an end-2026 EUR/USD forecast of 1.22 and noted; “Fed cuts, German fiscal spending and higher levels of USD FX hedging will lead to a 2017 analogue playing out in 2025/26 but it’s hard to go further than that.”

SocGen also postulated historical comparisons, but does not see a happy ending for the Euro; “There are echoes here of 2020/21 and 2016/17. In both cases, hope that Euro-Zone growth prospects would improve, and monetary policy normalise contrasted with fears that the US economy would suffer a longer-term hangover. In both cases, EUR/USD made it above 1.20, but never got near 1.30 and before long was falling again.”

It added; “over the next few years, unless European economic policy becomes more growth-orientated, a return to the EUR/USD post-2024 average and occasional spikes below 1.10 look depressingly likely.”

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TAGS: Euro Dollar Forecasts

The GBPJPY pair provided a new negative close below the resistance at 208.95, to force it to activate the attempts of gathering gains, to reach 207.35 this morning, facing negative pressures by stochastic exit from the overbought level confirms the importance of reaching extra support at 206.95.

The stability above the targeted support will reinforce the chances of forming positive attempts to target 208.10 level, reaching the mentioned main resistance, while the decline below this support and providing negative close will open the way for resuming the bearish corrective attack, which might target 206.30 and 205.80 level.

The expected trading range for today is between 206.95 and 208.20

Trend forecast: Bearish

The EURJPY pair surrendered since this morning to the bearish corrective scenario, affected by the stability of the barrier near 183.30 besides stochastic exit from the overbought level, activating the attempts of gathering the gains by reaching 182.15.

Renewing the corrective attempts to test the extra support at 181.70, attempting to gather the positive momentum to form bullish waves and recover the current losses by its rally towards 182.80, 

Waiting to breach the barrier to open the way for recording new gains that might extend towards 183.50 reaching the next main target at 184.10 in the near sessions.

The expected trading range for today is between 181.70 and 182.70

Trend forecast: Fluctuated within the bullish trend

Japan’s Services Sector in the Spotlight

On Tuesday, December 16, preliminary private sector PMI data will be in focus. The S&P Global Services PMI will be the focal point, given that services account for around 70% of the GDP. Economists forecast the S&P Global Services PMI to drop from 53.2 in November to 51.6 in December.

While slower services sector activity may signal a loss of economic momentum, holding above the 50 neutral level will be key. Furthermore, traders should focus on the employment and prices sub-components. A tighter labor market, higher wage growth (input prices), and hotter inflation (output prices) would signal a more hawkish BoJ rate path.

Will Trade Data Greenlight a December Rate Hike?

On Wednesday, December 17, Japanese trade data will provide insights into the effect of US tariffs on demand. Economists predict exports to rise 4.8% year-on-year (YoY) in November, up from 3.6% in October. Imports are expected to rise 2.5% YoY in November, up from 0.7% in October.

A sharp pickup in external demand and robust imports would support Governor Ueda’s view that US tariff risks have diminished. Given Japan’s trade-to-GDP ratio is roughly 45%, improving trade terms would boost the economy and demand for the yen.

For context, external demand fell 0.2% quarter-on-quarter in Q3, contributing to a 0.6% economic contraction. However, the US reduced tariffs on Japanese goods from 25% to 15% in Q3, boosting external demand early in Q4.

Japanese National Inflation in Focus Pre-BoJ Policy Decision

On Friday, December 19, national inflation figures will draw interest ahead of the BoJ’s monetary policy decision. Economists forecast the so-called core-core annual inflation rate to remain at 3.1% in November. Steady or rising core-core inflation would boost expectations of a more hawkish BoJ monetary policy outlook.

I wrote on the 7^th December that the best trades for the week would be:

1. Long of the S&P 500 Index following a daily close above 6,920. This did not set up.
2. Long of Silver with half the normal position size. This gave a win of 2.71%.

Overall, these trades gave a gain of 1.36% per asset.

A summary of last week’s most important data:

1. US Federal Funds Rate, Statement, and Projections – a rate cut of 0.25% was made, which was no surprise, although there was plenty of hidden dissent, making this widely perceived as a “hawkish cut”. However, this did not stop the US Dollar falling over the week.
2. Bank of Canada Overnight Rate and Rate Statement – as expected, the Bank kept its interest rate unchanged, and this had little effect on the Loonie.
3. Reserve Bank of Australia Cash Rate and Rate Statement – as expected, the Bank kept its interest rate unchanged, but signaled its discomfort with inflation, raising the prospect of rate hikes in 2026, which should give some tailwind to the Aussie going forward.
4. Swiss National Bank Monetary Policy Rate and Monetary Policy Assessment – the zero interest rate was kept unchanged as expected, despite the deflation that has been seen in recent months. This might boost the Swissie, which is already very strong, as the Bank does not want negative interest rates, so it has nowhere to go.
5. US JOLTS Job Openings – this was somewhat better than expected, which reduces the case for further rate cuts.
6. US Employment Cost Index – this was slightly lower than expected.
7. UK GDP – this unexpectedly showed a very small decrease, which is psychologically significant, as it would herald a technical recession if the decline persists over two quarters. This caused the Pound to weaken a bit.
8. US Unemployment Claims – this was roughly as expected.
9. Australian Unemployment Rate – this was slightly better than expected, at 4.3%, but won’t have any real effect on the interest rate outlook.

Last week’s data had a marginal impact, with the most important market outcome likely to be a continued strengthening of the Swiss Franc, which has been quietly gaining and gaining. This is a currency with a positive real rate of interest which is being allowed by its central bank to steadily strengthen. It is extremely attractive as a safe haven currency, with the Swiss National Bank’s machinations in 2015 mostly forgotten.

Most stock markets ended the week slightly lower. It was generally a week of little change in the financial markets, except precious metals, which look increasingly bullish.

The US Dollar had a bearish week, breaking down below key support and invalidating its former long-term bullish trend which had recently begun.

The coming week is the last full week of open markets before the Christmas holiday gets underway. This might mean a more active market than usual, because the week is full of important central bank policy meetings (including two widely expected rate cuts) and inflation data.

We are likely to see an increase in volatility this week.

This week’s most important data points, in order of likely importance, are:

1. US CPI (inflation) – expected to show a month-on-month increase of 0.3%.
2. US Average Hourly Earnings – expected to show a month-on-month increase of 0.3%.
3. US Non-Farm Employment Change
4. European Central Bank Policy Meeting
5. Bank of Japan Policy Meeting – a rate hike of 0.25% is expected.
6. US Retail Sales
7. Bank of England Policy Meeting – a rate cut of 0.25% is expected.
8. Canadian CPI (inflation) – expected to show a month-on-month increase of 0.1%.
9. UK CPI (inflation) – expected to show an annualised rate of 3.5%.
10. US / UK / Germany PMI Flash Services & Manufacturing
11. New Zealand GDP – expected to show fairly strong quarterly growth of 0.8%.
12. US Unemployment Rate
13. UK Retail Sales
14. UK Claimant Count Change

Currency Price Changes and Interest Rates

For the month of December 2025, I made no forecast.

Last week, I made no forecast, as there were no recent excessive moves in currency crosses.

The Euro was the strongest major currency last week, while the Japanese Yen was the weakest. Directional volatility fell again last week, with only 19% of all major pairs and crosses changing in value by more than 1%.

Next week’s volatility could be large as there will be three major central bank policy meetings plus key inflation data.

You can trade these forecasts in a real or demo Forex brokerage account.

Key Support and Resistance Levels

Last week, the US Dollar Index printed another bearish candlestick with only a minor lower wick. The price is still above its level of 13 weeks ago, but below its level of 26 weeks ago, so by my preferred metric, I declare the long-term bullish trend has failed. The price has also broken below a cluster of key support levels which had held for a long time, which I see as a very bearish sign for the greenback.

The Fed is cut its interest rate last week by 0.25% as was widely expected. However, the outlook for further rate cuts over the coming two years looks very slight. It is interesting that the market is shaking that off, which would normally put a bid into the Dollar, and continuing to sell it – that is a bearish sign.

I think being short of the US Dollar will be a generally good approach now, so over the coming week I will look for trades which fit that bias.

US Dollar Index Weekly Price Chart

The CHF/JPY currency cross weekly chart printed a powerful bullish candlestick that reached an all-time high price. This alone is a notably bullish sign but just look at the orderly ascending trend we have seen here since March this year, shown by the linear regression price channel study in the price chart below.

I usually ignore trends in currency crosses, but this is a powerful one. There are also good fundamental reasons why the Swiss Franc has been the strongest major currency over the long term, and the Japanese Yen has been the weakest.

The Swiss Franc has a zero interest rate but deflation, so the currency is naturally appreciating, while the Japanese Yen has been declining for a long time due to an ultra-loose monetary policy. However, that might change for the Yen soon, as the Bank of Japan is expected to hike rates this week, and might even begin a more aggressive and continuous round of hikes in 2026.

I will not be going long here myself, but it is something other trades might want to investigate and consider.

CHF/JPY Weekly Price Chart

The weekly price chart below shows that this major US stock index fell last week, after coming very close to breaking its record high just a few weeks ago. It closed at a record high closing price on Thursday, and then opened high on Friday and then fell sharply to print a bearish near pin-bar candlestick.

This is a bearish sign, which could well be dangerous to act upon. I am not advocating going short, but bulls should be worried, although it is clearly still a bull market.

I wrote a week or two ago that I was becoming more convinced that we have already seen a medium-term high in this stock market index, and this confirms my opinion. I think we are seeing a topping out which is likely to start some kind of retracement.

The Fed seems less and likely to make significant rate cuts in the foreseeable future, and there are strong and realistic concerns about an AI bubble and a general over-valuation of the stock market, so a bearish retracement cannot be a big surprise if it happens.

However, if we get a daily close with no significant upper wick on that day’s candle above the record high at 6,930, I will enter a new long trade.

S&P 500 Index Weekly Price Chart

A few weeks / months ago, Silver was in a strong bullish trend which saw the price increase by about 50% in only two months. The rise peaked in October and saw quite a strong retracement, which is usually a sign that the price is not going to make new highs soon. This bearish outlook was reinforced by what seemed to be a bearish double top formed just four weeks ago. However, the price has come up again and then made a very strong bullish breakout with an unusually large move.

We saw a further gain last week as the bullish momentum continued. Volatility is high and the moves can be messy but it’s a bullish breakout that continues to advance.

Another bullish factor is that all the major precious metals rose in value last week, although there is no doubt the Silver is leading the way.

Due to the high volatility and “second bite” breakout, as well as the significant upper wick on the weekly candlestick, I think a half-sized long position is best here, and only after we see a new record high daily close at or above $63.57.

Silver Weekly Price Chart

All precious metals have been rising as an asset class, partly fueled by Fed policies and the declining Dollar, partly due to safe haven inflow.

Silver has clearly been leading the way, but this past week has seen Gold start to catch up with a minor bullish breakout beyond the $4,270 area.

The record high above $4,300 is now in sight, but Gold formed a pin bar on Friday which puts some doubt into whether it will retest or even exceed its record high which it made in October.

I will keep a close eye on Gold and enter a new long trade if we get a daily close above the record high, at or above $4,355.80.

If this long trade sets up, as the progress upwards has been steadier and more orderly than what we have seen in Silver, you might keep a normal position size. I will prefer to use half my normal position size.

Gold Weekly Price Chart

I see the best trades this week as:

1. Long of the S&P 500 Index following a daily close above 6,920.
2. Long of Silver with half the normal position size following a daily close above $63.57.
3. Long of Gold with half the normal position size following a daily close above $4,355.80.

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