GBP remains under pressure against both the Euro and the US Dollar as it navigates a challenging week. Against the Euro, Sterling has entered a technical downtrend, with the exchange rate currently at 1.1850 after three consecutive weeks of losses. A break below the 200-day exponential moving average (EMA) last week signals the potential for a sustained decline, as this technical level now acts as resistance. Tuesday’s UK labour market report is a critical event, with rising unemployment and wage data likely to shape market sentiment. Should the data reveal a weaker-than-expected labour market, expectations for further interest rate cuts from the Bank of England may deepen, exerting additional downward pressure on the Pound.
Similarly, GBP/USD remains vulnerable, consolidating around 1.22 but retaining a negative technical outlook. Momentum indicators suggest further losses are likely, with downside targets of 1.21 and potentially 1.1850. The Dollar’s movements will also hinge on US political developments this week, with markets closely watching President Trump’s inaugural policy announcements. The interplay of UK-specific economic challenges and global risk sentiment makes for a volatile environment for Sterling traders.
This week marks the inauguration of Donald Trump as the President of the United States, an event that is set to dominate global market sentiment. Traders are particularly focused on Trump’s initial policy pronouncements, especially on tariffs, taxes, and immigration. A blanket tariff on imports could strengthen the Dollar, as it would likely drive inflation higher and prompt the Federal Reserve to maintain elevated interest rates. However, a more measured approach to trade policies could weaken the Dollar, providing some relief for the Pound and Euro.
Markets remain cautious, with global stocks consolidating ahead of concrete policy announcements. The uncertainty surrounding Trump’s economic agenda adds another layer of complexity for foreign exchange markets, making this a pivotal week for the US Dollar and broader global markets.
