Forex News
- The Pound Sterling trades with caution at the start of the week ahead of key UK data and the BoE’s monetary policy decision.
- Investors expect the BoE to cut interest rates by 25 bps to 3.75% on Thursday.
- Before the BoE decision, UK unemployment and inflation data will be published.
The Pound Sterling (GBP) starts the Bank of England’s (BoE) monetary policy week on a cautious note against its major peers. However, the British currency braces for volatility and might face selling pressure this week amid a flurry of economic data releases and strong expectations that the Bank of England (BoE) is expected to cut interest rates by 25 basis points (bps) to 3.75%.
Analysts at Deutsche Bank expect the BoE to reduce interest rates by 25 bps, with a 5-4 vote split amid signs of easing inflationary pressures and a softer labor market. In October, the United Kingdom’s (UK) core Consumer Price Index (CPI) – which excludes volatile components of food, energy, alcohol and tobacco – grew by 3.4% year-on-year, the lowest figure seen since March.
Ahead of the BoE’s policy announcement, the UK CPI data for November will be published on Wednesday, which is expected to show that core inflation rremained at 3.4%.
On Tuesday, the UK labour market data for the three months ending October and the preliminary S&P Global Purchasing Managers’ Index (PMI) data for December are scheduled to be released. The employment data is expected to show that the jobless rate accelerated further and wage growth cooled.
Daily digest market movers: Pound Sterling flattens against US Dollar ahead of US NFP data
- The Pound Sterling trades flat around 1.3370 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair consolidates as investors await the United States (US) Nonfarm Payrolls (NFP) data for October and for November, which is scheduled to be published on Tuesday.
- Investors will closely monitor the US employment data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. The Fed has reduced its interest rates by 75 basis points (bps) in the last three monetary policy meetings, and comments from officials have signaled that the major driver behind rate cuts was weak labor market conditions.
- On Friday, San Francisco Fed Bank President Mary Daly said in a Linkedin post that she favored interest rate cuts, adding that “inflation is too high and the job market is getting softer, but we cannot let the labor market falter", Reuters reported.
- On Tuesday, investors will also focus on US Retail Sales for October and flash S&P Global PMI data for December.
- Broadly, the Cable is upbeat as the US Dollar (USD) remains close to its eight-week low amid growing expectations that the Federal Reserve (Fed) will deliver more interest rate cuts in 2026 than officials signaled in the dot plot last week.
- At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades with caution near its eight-week low of 98.13.
- According to the CME FedWatch tool, there is a 64.3% chance that the Fed will cut interest rates at least two times by the end of 2026. This market bets defy the last Fed’s dot plot, which showed that policymakers see the Federal Fund Rate falling to 3.4% by 2026, indicating just one more interest rate cut from current levels of 3.50%-3.75%.
Technical Analysis: GBP/USD aims to break above 50% Fibo retracement at 1.3400
GBP/USD trades steadily around 1.3366 as of writing. The 20-day Exponential Moving Average (EMA) at 1.3286 rises, and the pair holds above it, keeping the near-term bias pointed higher.
The 14-day Relative Strength Index (RSI) at 61 reflects positive momentum without overbought conditions.
Measured from the 1.3783 high to the 1.3008 low, the 38.2% retracement at 1.3304 has been cleared, underpinning the recovery tone. The 50% retracement at 1.3395 marks immediate resistance, and a break higher would extend the rebound towards 61.8% Fibo retracement at 1.3488. Failure to top that barrier could see consolidation back toward the moving average.
The trend remains supported while price sustains above the ascending 20-day EMA, though a drop beneath 1.3286 would open the door for further downside towards the December low of 1.3180.
(The technical analysis of this story was written with the help of an AI tool)
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.
The report by State Secretariat of Economic Affairs on Economic Forecasts shows that the inflation is projected to average at 0.2% in 2025 and 2026, and is estimated to grow by 0.5% in 2027.
The Gross Domestic Product (GDP) growth is expected at 1.4% in 2025, 1.1% in 2026 and 1.7% in 2027.
Market reaction
The impact of the SECO Economic Forecasts is expected to be insignificant on the Swiss Franc (CHF). As of writing, the USD/CHF pair trades 0.06% higher around 0.7965.
Swiss economy FAQs
Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.
Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.
As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.
- The Japanese Yen kicks off the new week on a positive note amid rising BoJ rate hike bets.
- A softer risk tone further benefits the safe-haven JPY, while a dovish Fed weighs on the USD.
- Traders now look to this week’s important US macro releases and the BoJ policy meeting.
The Japanese Yen (JPY) sticks to its intraday gains through the early European session on Monday and seems poised to apprciate further amid hawkish Bank of Japan (BoJ) expectations. Against the backdrop of the recent shift in rhetoric from Bank of Japan (BoJ) Governor Kazuo Ueda, an improvement in business confidence reaffirms market bets for an imminent rate hike this week. Apart from this, a slight deterioration in the global risk sentiment turns out to be another factor underpinning the JPY's safe-haven status.
The aforementioned supporting factors, to a larger extent, offset concerns about Japan's deteriorating fiscal condition on the back of Prime Minister Sanae Takaichi's massive spending plan. The US Dollar (USD), on the other hand, languishes near a two-month low, touched last Thursday, amid rising bets for two more interest rate cuts by the Federal Reserve (Fed). This marks a significant divergence compared to hawkish BoJ expectations, which, in turn, validates the near-term positive outlook for the lower-yielding JPY.
Japanese Yen is underpinned by hawkish BoJ bets and safe-haven flows
- According to the Bank of Japan's quarterly Tankan survey released earlier this Monday, the business confidence index at large manufacturers in Japan rose to 15 in the fourth quarter of 2025 from 14.0 in the previous quarter. Further details revealed that the large Manufacturing Outlook arrived at 15.0 vs 12.0 prior.
- Commenting on the Tankan survey, a senior BoJ official said that Japanese firms cited easing uncertainty around US trade policy and resilient demand in high-tech sectors as key factors supporting business sentiment. Firms cited pass-through of costs and robust demand as factors brightening the business outlook.
- Moreover, BoJ Governor Kazuo Ueda recently said that the central bank is getting closer to attaining its inflation target. This reaffirms market bets for an imminent BoJ interest rate hike at the end of the December 18-19 policy meeting and backs the case for further policy tightening going into 2026.
- Moreover, reports suggest that top officials in Prime Minister Sanae Takaichi’s cabinet are unlikely to oppose a BoJ rate hike. Traders, however, seem reluctant to place bullish bets around the Japanese Yen and opt to wait for more cues about the BoJ's future policy path before positioning for further gains.
- Hence, the focus will remain glued to Ueda’s post-meeting press conference on Friday. In the meantime, Takaichi's massive spending plan has exacerbated concerns about Japan's public finances amid sluggish economic growth, which, in turn, is seen as another factor acting as a headwind for the JPY.
- The US Dollar, on the other hand, struggles to attract any meaningful buyers and languishes near a two-month low touched last Thursday amid dovish Federal Reserve expectations. The Fed signaled caution about further rate cuts, though traders are pricing in two more interest rate cuts next year.
- Meanwhile, US President Donald Trump said that he had narrowed the list of contenders to replace Jerome Powell as the next Fed chair and expects his nominee to deliver interest-rate cuts. The prospect of a Trump-aligned Fed chair keeps the USD bulls on the defensive and caps the USD/JPY pair.
- Traders also seem reluctant ahead of this week's important US macro releases – including the delayed Nonfarm Payrolls (NFP) report for October on Tuesday and the latest inflation figures on Thursday. In the meantime, the divergent BoJ-Fed outlooks might continue to support the lower-yielding JPY.
USD/JPY bears now await break below 155.00 before placing fresh bets
From a technical perspective, the USD/JPY pair has been struggling to move back above the 100-hour Simple Moving Average (SMA), and the subsequent slide favors bearish traders. However, positive oscillators on the daily chart suggest that any further decline is more likely to find decent support near the 155.00 psychological mark. A convincing break below the latter would turn spot prices vulnerable to accelerate the fall towards the monthly low, around the 154.35 area, en route to the 154.00 mark.
On the flip side, the 100-hour SMA, currently pegged at the 156.00 round figure, might continue to act as an immediate hurdle. Some follow-through buying beyond Friday's swing high, around the 156.10-156.15 region, might trigger a short-covering move and lift the USD/JPY pair to the 157.00 neighborhood. A sustained strength beyond the latter should pave the way for additional gains towards the 157.45 intermediate hurdle en route to a multi-month top, around the 158.00 neighborhood, touched in November.
Economic Indicator
BoJ Interest Rate Decision
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
Read more.Next release: Fri Dec 19, 2025 03:00
Frequency: Irregular
Consensus: -
Previous: 0.5%
Source: Bank of Japan
- Gold attracts some buyers in Monday’s early European session, up 1.0% on the day.
- Fed rate cut expectations and safe-haven flows provide some support to the Gold price.
- Traders await the US NFP data for October and November on Tuesday for fresh impetus.
Gold price (XAU/USD) rises to seven-week highs to near $4,350 during the early European trading hours on Monday. The precious metal extends its upside amid the prospect of interest rate cuts by the US Federal Reserve (Fed) next year. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. Additionally, uncertainty and the risk-off sentiment could boost the safe-haven flows, benefiting the yellow metal price.
Nonetheless, hawkish remarks from Fed officials last week could lift the US Dollar (USD) and weigh on the USD-denominated commodity price. Traders will take more cues from the speeches by Fed Governor Stephen Miran and New York Fed President John Williams later on Monday.
The US employment report for October and November will take center stage on Tuesday, including Nonfarm Payrolls (NFP), Average Hourly Earnings and Unemployment Rate. These reports could provide more clarity on the labor market's health and likely influence expectations for the Fed's January meeting.
Daily Digest Market Movers: Gold jumps as Fed delivered its final 2025 rate cut, safe-haven flows
- Bloomberg reported on Sunday that a mass shooting at Bondi Beach in the Australian city of Sydney had killed at least 16 people and wounded 40. Australian Prime Minister Anthony Albanese said in a press conference early Monday that the shooting was a “targeted attack” on the Jewish community. He had previously described the incident as an “act of evil antisemitism, terrorism that has struck the heart of our nation.”
- Chicago Fed President Austan Goolsbee said on Friday that he “felt the more prudent course would have been to wait for more information” before cutting rates again after a government shutdown delayed several key economic reports in October and November.
- Cleveland Fed President Beth Hammack stated that the central bank should keep rates high enough to continue putting downward pressure on inflation.
- The US Fed last week announced its third and final quarter-point rate reduction this year, cutting interest rates by 25 basis points (bps) to a target range of 3.50% to 3.75%.
- Fed Chair Jerome Powel said that the reduction puts the central bank in a comfortable position as far as rates go. “We are well positioned to wait and see how the economy evolves,” said Powell.
- Markets are currently pricing in nearly a 76% probability that the Fed will hold interest rates steady in January 2026, compared with a 70% chance just before the December rate cut announcement, according to the CME FedWatch tool.
Gold maintains its constructive outlook in the longer term
Gold price trades in positive territory on the day. According to the four-hour timeframe, the positive outlook of the precious metal remains in play as the price holds above the key 100-day Exponential Moving Average. The Bollinger Band widens, suggesting a strong bullish trend. Furthermore, the upward momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands above the midline near 68.75. This displays the bullish momentum for the yellow metal.
On the bright side, the first upside barrier to watch is in the $4,345-$4,355 zone, representing the upper boundary of the Bollinger Band and the high of December 12. Sustained upside momentum could take XAU/USD back up to an all-time high of $4,381. Further north, the next resistance level is located at the $4,400 psychological mark.
On the downside, the initial support level for the yellow metal is seen at the low of December 12 at $4,257. More bearish candlesticks reflect a continuation of downside pressure, possibly dragging the price down to the next bearish target at $4,200, the 100-day EMA. The next contention level emerges at $4,166, the lower limit of the Bollinger Band.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- USD/CHF trades flat around 0.7960 in Monday’s early European session.
- Traders await the US employment reports for October and November, which are due on Tuesday.
- Uncertainty and a risk-off mood could boost the safe-haven flows, supporting the Swiss Franc in the near term.
USD/CHF holds steady near 0.7960 during the early European session on Monday. However, the potential upside for the pair might be limited as markets turn cautious ahead of key economic data releases later this week. The US employment reports for October and November are due on Tuesday. The US Consumer Price Index (CPI) inflation data will be released on Thursday.
Expectations that the US Federal Reserve (Fed) will implement more interest rate cuts in 2026 weigh on the US Dollar (USD) against the Swiss Franc (CHF). The Summary of Economic Projections, or so-called "dot plot,” indicated a median forecast of one additional Fed rate reduction next year. Meanwhile, the Swiss National Bank (SNB) held its policy rate at 0% and is expected to maintain this stance for an extended period to manage inflation.
Traders turn cautious and brace for the key US economic data later this week. The US Nonfarm Payrolls (NFP) data for October and November, which were delayed due to a US government shutdown, are set to be released on Tuesday. The risk-off market environment could support the safe-haven currency like the Swiss Franc (CHF) and act as a headwind for the pair.
"From policymakers' perspective... this set of data, whatever the outcome is, they will probably interpret it more carefully than usual. The main thing you want to do is to tease out the trend in terms of the labour market in the U.S.,” said Sim Moh Siong, a currency strategist at Bank of Singapore. Traders will closely watch these reports, as they might offer some hints about the labor market's health and the US interest rate path. In case of a stronger-than-expected outcome, this could lift the Greenback against the CHF in the near term.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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