Pound Sterling Falls vs Dollar and Euro Ahead of Next US Data

January 14, 2025 - Written by Frank Davies

STORY LINK Pound Sterling Falls vs Dollar and Euro Ahead of Next US Data

The Pound US Dollar exchange rate dropped significantly on Monday as ongoing concerns over the UK’s bond market continued putting pressure on the British currency.

The British Pound (GBP) faced further decline and continued on its downward trend against most major currencies.

The British currency remained under significant pressure due to the UK’s bond market challenges.

Last week, the yield on the 30-year UK government bond hit its highest level since 1998 and rose by an additional 6 points on Monday.

These events continued to dampen sentiment toward the Pound throughout Tuesday’s European trading session, driven by ongoing worries about the UK’s overall fiscal stability.

On Monday, the US Dollar (USD) gained significant strength against its major counterparts, supported by last week’s upbeat jobs report and a cautious market sentiment.

On Friday of last week, the US released its latest non-farm payrolls data, which showed that 256,000 new jobs were added in December—far exceeding the market’s more modest prediction of 160,000.

This strong jobs data reinforced the expectation that the Federal Reserve will likely slow down its current rate-cutting cycle, which in turn bolstered USD exchange rates heading into this week.

Chris Turner, ING’s Head of Markets, noted: ‘Friday’s strong US jobs release has provided another leg higher for the dollar. It is hard to see the dollar trend changing this week given the prospect of another strong set of US inflation data, which will
increasingly raise the question of whether the Fed needs to cut rates this year at all.’

Adding to the USD’s strength on Monday was a generally downbeat market mood, which further propelled the US Dollar due to its status as a safe-haven currency.

Looking ahead to Tuesday's outlook, the main factor influencing the GBP to USD exchange rate will likely be the release of the US’s latest Producer Price Index (PPI).

With the PPI forecast to marginally decline in December, this could put some downward pressure on USD exchange rates as the trading session begins on Tuesday.

Meanwhile, the Pound is expected to remain under pressure as we enter Tuesday’s European trading session, as a lack of domestic releases will likely keep GBP investors focused on the country’s broader financial outlook.

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TAGS: Pound Dollar Forecasts