Pound sterling price strengthens as Trump calls for Fed rate cuts and UK PMI surprises markets
GBP/USD rises above 1.2400 as UK PMI strengthens and Trump backs Fed rate cuts
The British pound (GBP) surged past the 1.2400 mark against the US dollar (USD) on Friday, hitting a two-week high. This rally followed comments from U.S. President Donald Trump at the World Economic Forum (WEF) advocating for immediate Federal Reserve rate cuts. The dovish remarks weighed heavily on the USD, which tumbled to a one-month low, with the U.S. dollar Index (DXY) dropping to 107.60.
Trump’s call for rate cuts coincides with the Fed’s upcoming monetary policy meeting on January 29, where rates are expected to remain steady at 4.25%-4.50%. Although Trump’s comments have stirred market sentiment, the Fed is unlikely to be swayed as it maintains its focus on economic stability.
GBP/USD price analysis (Dec 2024 - Jan 2025) Source: TradingView.
UK economic outlook bolsters GBP
Adding to the pound’s strength was better-than-expected UK economic data. The flash S&P Global/CIPS Composite Purchasing Managers’ Index (PMI) for January rose to 50.9, surpassing market expectations of 50.0 and December’s reading of 50.4. The robust growth was driven by gains in both the manufacturing and services sectors.
Despite this positive momentum, analysts remain cautious about the UK’s economic trajectory. Weaker labor demand and subdued household spending have kept market expectations firm on a 25 basis point rate cut by the Bank of England (BoE) in February, reducing rates to 4.5%.
Technical analysis: Key levels for GBP/USD
The GBP/USD pair has broken above its 20-day Exponential Moving Average (EMA) at 1.2363, signaling a near-term bullish shift. The 14-day Relative Strength Index (RSI) rebounded to 50.00, suggesting a temporary end to bearish momentum. Immediate resistance lies near the 50-day EMA at 1.2515, while support levels are marked at 1.2100 and 1.2050.
In earlier analysis, we highlighted how Trump’s tariff threats and BoE’s dovish outlook shaped the pair’s movement. These elements remain crucial in defining GBP/USD’s trajectory in the near term.
