GBP/USD climbs above 1.3500 as US Dollar weakens ahead of ISM Services PMI
- GBP/USD strengthens as the US Dollar loses ground after registering modest gains in the previous session.
- Fed’s Stephen Miran said the US central bank should aggressively cut interest rates this year to support economic momentum.
- The Pound Sterling ticks higher, brushing aside heightened geopolitical risks after the US intervention in Venezuela.
GBP/USD gains some ground after registering modest gains in the previous session, trading around 1.3510 during the Asian hours on Wednesday. The pair edges higher as the US Dollar (USD) struggles ahead of the US ISM Services Purchasing Managers’ Index (PMI) and JOLTs job openings due later in the day.
Fed Governor Stephen Miran said on Tuesday that the US central bank should cut interest rates aggressively this year to sustain economic momentum. Meanwhile, Minneapolis Fed President Neel Kashkari, a voter on the Fed's rate-setting committee, cautioned that the unemployment rate could “pop” higher.
Richmond Fed President Tom Barkin, a non-voter on the Fed’s rate-setting committee this year, said Tuesday that interest rate adjustments will need to be “finely tuned” to incoming data, citing risks to both the Fed’s employment and inflation objectives, according to Reuters.
The risk-sensitive Pound Sterling (GBP) inches higher as traders have so far largely shrugged off escalating geopolitical tensions worldwide following the US intervention in Venezuela and the capture of President Nicolas Maduro.
S&P Global reported on Tuesday that the United Kingdom (UK) Composite PMI rose marginally to 51.4 in December 2025 from 51.2 in November, but was revised sharply lower from the preliminary reading of 52.1 and fell short of market expectations of 51.6. Nevertheless, the data marked the eighth consecutive month of expansion in British private-sector activity.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Recommended Articles
