The Pound to Dollar (GBP/USD) exchange rate traded lower on Wednesday as upbeat US services data underpinned the US Dollar and global risk concerns capped Sterling demand.
Pound to Dollar (GBP/USD): 1.34724 (-0.2%)
Euro to Dollar (EUR/USD): 1.16901 (+0.02%)
Dollar to Japanese Yen (USD/JPY): 156.6135 (-0.03%)
DAILY RECAP:
The US Dollar (USD) firmed on Wednesday following the release of the latest ISM services PMI.
The index jumped sharply from 52.6 to 54.4 in December, comfortably beating forecasts for a dip to 52.3 and marking the strongest expansion in the services sector since October 2024.
Survey respondents attributed the strength to a surge in seasonal demand and increased business activity ahead of the new year.
However, gains in the US Dollar were capped after accompanying labour market data showed job openings fell to a one-year low of 7.1m in November, reinforcing concerns over labour market resilience and keeping expectations for Federal Reserve rate cuts alive.
Meanwhile, the Pound (GBP) drifted on Wednesday as a lack of UK economic data left Sterling trading in line with broader market sentiment.
Investor caution remained elevated amid rising geopolitical tensions linked to Greenland, following renewed comments from the White House about potential territorial ambitions and the possibility of military action.
The prospect of one NATO member using force against another unsettled markets, raising fresh questions about alliance cohesion and the broader implications for European security.
Near-Term GBP/USD Forecast: US Payrolls to Drive Direction?
Looking ahead to the second half of the week, US labour market data is expected to be the primary driver of movement in the Pound to Dollar exchange rate.
Thursday’s initial jobless claims may show a modest rise in new unemployment filings, which could weigh on the US Dollar if confirmed.
However, the main focus will be Friday’s non-farm payrolls report. Evidence that employment growth remained subdued in December could strengthen expectations for Federal Reserve rate cuts and place renewed pressure on USD.
With UK economic releases thin on the ground, Sterling is likely to remain sensitive to shifts in global risk appetite through the remainder of the week.
