GBP/USD price holds steady amid Fed hawkishness and BoE uncertainty
GBP/USD holds near 1.2440 as markets eye Fed updates and labor data
The British pound traded near 1.2440 during Monday’s early European session, attempting to extend its recent recovery against the US dollar. Despite the positive movement, the GBP/USD pair remains under pressure as markets brace for key Federal Reserve (Fed) updates and fresh US labor data.
Fed Governor Lisa Cook is expected to shed light on the central bank’s cautious approach during her scheduled speech later today.
GBP/USD price dynamics (Nov 2024 - Jan 2025) Source: TradingView.
Fed outlook supports dollar strength
The US dollar's resilience has been fueled by the Fed’s hawkish monetary stance. Since September 2024, the Fed has reduced interest rates by one percentage point but signaled a slower pace of rate cuts moving forward. Fed officials have reiterated their commitment to curbing inflation while balancing the need for a strong labor market.
Key labor market data due on Friday is set to influence market sentiment further. Economists anticipate 150,000 new jobs in December, with the unemployment rate holding at 4.2%. Average hourly earnings are projected to increase by 0.3% month-over-month. Any deviation from these expectations could sway the dollar’s momentum against the British pound.
BoE dovish outlook weighs on sterling
The British pound’s gains remain capped by growing market expectations of Bank of England (BoE) rate cuts. Current market pricing suggests a 60 basis point cut this year, an increase from the 53 basis points forecasted at the end of December. This cautious sentiment has been attributed to mixed economic signals, with fragile consumer demand clashing with inflationary pressures stemming from domestic fiscal policies and global tariff risks.
The GBP/USD pair faces immediate resistance at 1.2450, with further upside limited at 1.2500 if bullish sentiment persists. Support levels are seen at 1.2400 and 1.2350, with a potential breach below these levels signaling increased bearish sentiment.
In our previous report, we highlighted how stronger US labor data reinforced dollar strength and pushed the pair near 1.2350. These factors remain critical as traders monitor new developments in labor market trends and central bank policy shifts.
