Forex News
- The Pound Sterling bounces back against its major currency peers, recovering some of the previous day’s losses.
- A higher-than-expected number of BoE members supporting an interest rate cut on Thursday weighed on British currency.
- The US Dollar retraces as soft US labor market data supports dovish Fed bets.
The Pound Sterling (GBP) regains ground against its major currency peers on Friday after a sharp fall the previous day, which was driven by the Bank of England’s (BoE) signal that there is a high chance of an interest-rate cut in the near term.
In the monetary policy announcement on Thursday, the BoE unanimously decided to leave interest rates unchanged at 3.75%, with a 5-4 vote split. The BoE was widely expected to maintain the status quo, but the number of Monetary Policy Committee (MPC) members supporting keeping rates unchanged was lower than the seven expected by markets.
Regarding the monetary policy outlook, the BoE reiterated that the policy will remain on a “gradual downward path”, while expressing confidence that inflationary pressures will return to the 2% target “ahead of the schedule expected in November”. Governor Andrew Bailey refrained from setting a timeframe for the next interest-rate cut and declined to endorse 3.25% as a terminal rate, a level that neither restricts nor stimulates economic growth.
Still, markets quickly priced in a higher likelihood of a near-term cut. The Pound Sterling lost 0.8% on the day against the US Dollar (USD), with the GBP/USD pair touching a two-week low.
In Friday’s session, investors will pay close attention to BoE Chief Economist Huw Pill’s comments in a National MPC Agency briefing scheduled at 12:00 GMT for further details about the BoE's interest-rate outlook. Pill was one of five MPC members who voted to leave interest rates unchanged on Thursday.
Daily Digest Market Movers: Pound Sterling rises against US Dollar, US NFP in spotlight
- The Pound Sterling trades 0.3% higher to near 1.3570 against the US Dollar (USD) during the European trading session on Friday. The GBP/USD pair recovers after posting a fresh weekly low near 1.3500.
- A slight corrective move in the US Dollar after a week-long rally has also supported the pair. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is down 0.15% to near 97.80.
- The US Dollar has come under pressure as traders have raised bets supporting an interest rate cut by the Federal Reserve (Fed) at its Marchmonetary policy meeting. According to the CME FedWatch tool, the possibility of the Fed reducing interest rates next month by 25 basis points (bps) to 3.25%-3.50% has advanced to 22.7% from the 9.4% seen on Monday.
- Dovish Fed prospects have increased after the latest batch of United States (US) job market-related data showed continued weakness in the labor demand. The US JOLTS Job Openings report for December showed on Thursday that employers posted lower job vacancies – at 6.542 million against 6.928 million in November.
- ADP reported on Wednesday that the private sector created 22K jobs in January, less than the 37K added in December.
- For more cues on the current state of the US labor market, investors will focus on the Nonfarm Payrolls (NFP) data for January, which will be released on Wednesday.
Technical Analysis: GBP/USD aims to return above 20-day EMA
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GBP/USD gains to near 1.3568 as of writing. The 20-day Exponential Moving Average (EMA) has softened to 1.3591 after a steady ascent, with price holding just beneath it and dampening immediate upside traction.
The 14-day Relative Strength Index (RSI) at 50 (neutral) confirms waning momentum from prior overbought readings.
The flattening 20-day EMA signals consolidation in the near term, though its elevated level still frames the upward trend bias. A decisive daily close back above 1.3591 could extend gains toward the February 4 high of 1.3733, while repeated rejection would keep the pair range-bound.
(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 Indian Rupee extends correction against the US Dollar after the RBI’s policy decision.
- The Indian central bank kept the Repo Rate steady at 5.25%, as expected.
- Accelerating dovish Fed expectations have put some pressure on the US Dollar.
The Indian Rupee (INR) falls sharply against the US Dollar (USD) during afternoon trading hours in India on Friday. The USD/INR pair recovers to near 90.85, even as the Reserve Bank of India’s (RBI) monetary policy announcement has held the Repo Rate unchanged at 5.25%, as expected.
The RBI was expected to maintain the status quo as it reduced the Repo Rate by 125 basis points (bps) in 2025, as price pressures have rebounded in the past few months, and the announcement of trade deals with the United States (US) and the European Union (EU) has lifted growth prospects. The Indian central bank has maintained a “neutral” stance on the monetary policy outlook, citing that India’s economy is in a “good spot” even as global uncertainties remain “elevated”.
On the economic outlook, the RBI expects higher-than-projected real Gross Domestic Product (GDP) in the next two quarters on the back of trade deals, and said that fresh GDP projections will be provided in the April policy meeting.
The Indian Rupee outperformed in the past few days, following the confirmation from India and the United States (US) that both will reduce tariffs. On Monday, US President Donald Trump said through a post on Truth Social that tariffs on imports from New Delhi will be lowered to 18%, from 50% prior, and there will be zero tariff charged on exports from Washington to India, which was later acknowledged by Indian Prime Minister (PM) Narendra Modi.
The event led to a sharp increase in the Indian Rupee, strong demand for Indian stocks, and a significant inflow of foreign funds into the Indian equity market. However, the lack of follow-up buying by Foreign Institutional Investors (FIIs) is weighing on market sentiment.
According to data from the National Stock Exchange (NSE), FIIs turned out to be net sellers on Thursday, offloading their stake worth Rs. 2,150.51 crore. On Tuesday, a day after the US-India trade truce, FIIs bought shares worth Rs. 5,236.28 crore.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | -0.24% | -0.14% | -0.10% | -0.31% | 0.45% | -0.11% | |
| EUR | 0.11% | -0.13% | -0.04% | 0.02% | -0.20% | 0.57% | 0.00% | |
| GBP | 0.24% | 0.13% | 0.11% | 0.13% | -0.07% | 0.70% | 0.13% | |
| JPY | 0.14% | 0.04% | -0.11% | 0.05% | -0.16% | 0.60% | 0.04% | |
| CAD | 0.10% | -0.02% | -0.13% | -0.05% | -0.22% | 0.58% | -0.00% | |
| AUD | 0.31% | 0.20% | 0.07% | 0.16% | 0.22% | 0.78% | 0.21% | |
| INR | -0.45% | -0.57% | -0.70% | -0.60% | -0.58% | -0.78% | -0.56% | |
| CHF | 0.11% | -0.00% | -0.13% | -0.04% | 0.00% | -0.21% | 0.56% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily Digest Market Movers: Soft US job data supports dovish Fed speculation
- The US Dollar struggles to extend its week-long rally on Friday as prospects of the Federal Reserve (Fed) reducing interest rates have improved, following a string of weak labor market data.
- At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 97.85. Still, the DXY is close to its weekly high of 97.98 posted on Thursday.
- The CME FedWatch tool shows that traders see a 22.7% chance that the Fed will cut interest rates by 25 basis points (bps) to 3.25%-3.50% in the March policy meeting, up from 9.4% seen on Wednesday.
- The US JOLTS Job Openings data for December showed on Thursday that employers posted 6.542 million fresh jobs, significantly lower than estimates of 7.2 million and the previous reading of 6.928 million.
- On Wednesday, the ADP reported that the private sector created 22K jobs in January, fewer than 37K in December.
- A majority of Federal Open Market Committee (FOMC) members have been expressing concerns over weak labor market conditions, citing the need for more interest rate cuts to support the same.
- For more cues on the current state of employment, investors will focus on the Nonfarm Payrolls (NFP) data for January, which will be released on Wednesday. The data has been delayed due to a partial federal shutdown, which resumed on Tuesday.
Technical Analysis: USD/INR bounces back to near 20-day EMA
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USD/INR jumps to near 90.85 at the press time. The pair recovers to near the 20-day Exponential Moving Average (EMA) at 90.95.
The 14-day Relative Strength Index (RSI) rebounds to near 50 (neutral), indicating buying interest at lower levels.
As long as the spot remains under the 20-EMA, rallies could stall, and the pair would continue to test lower levels. A recovery through the 20-EMA at 90.9282 would improve tone and open room for stabilization, while failure to reclaim it would preserve downside risk.
(The technical analysis of this story was written with the help of an AI tool.)
The report by Nordea, authored by Jan von Gerich, discusses the recent rebound of the USD against the EUR and JPY. Despite the rebound, the report maintains a bearish outlook for the USD in the long term as investors seek alternatives.
Recent USD movements and market outlook
"Such moves once again suggest that the USD is not on the verge of collapse and worries towards the status of the USD can ease as fast as they arise."
"That said, we continue to think the USD will weaken further going forward, as investors continue to seek alternatives to the USD, even if such a moves will not take place on a one-way street."
"We maintain our core views of no rate moves from either the Fed or the ECB this year, while we continue to expect longer rates to creep higher."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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