The GBP/USD pair fell during the Asian session on Tuesday and is reversing part of the previous day’s strong move up to the 1.3545-1.3550 area, or its highest level since September 2025. However, the downtrend lacks bearish conviction, with spot prices currently trading around the 1.3535-1.3530 area, down less than 0.10% on the day.
As investors eye Monday’s mixed December 2025 US PMI data, the US Dollar (USD) is attracting some safe-haven flows on the back of heightened geopolitical tensions and acting as a headwind for GBP/USD. The US S&P Global Manufacturing PMI settled at 51.8 and indicated continued expansion. In contrast, the Institute for Supply Management (ISM) manufacturing PMI showed signs of continued contraction and fell to 47.9 from 48.2 in November.
However, the US military attack on Venezuela, escalating political tensions between Saudi Arabia and the UAE over the conflict in Yemen, and the lack of progress on the peace agreement between Russia and Ukraine helped limit the dollar’s downside. However, the US dollar’s upward trend appears to be stalling amid bets on at least two interest rate cuts by the US Federal Reserve this year. This, coupled with a hawkish outlook from the Bank of England (BoE), is supporting the GBP/USD pair.
The narrow split in votes in favor of lowering borrowing costs in December indicated disagreements within the committee amid the latest inflation surprise. In fact, the British Retail Consortium reported this Tuesday that overall shop prices rose 0.7% year-on-year in December, and food inflation rose to 3.3% from 3.0% in November. This may force investors to reduce their expectations for further policy easing by the Bank of England and support the British pound, calling for caution for GBP/USD speculators.
Traders are now looking forward to the final Services PMI release from the UK and US for fresh momentum. However, immediate market reaction is likely to be muted as focus remains glued to the closely watched US Non-Farm Payrolls (NFP) report on Friday. Apart from this, other important US economic data scheduled for the beginning of the new month may provide signals about the path of the Fed’s interest rate cut, which will affect the demand for the US dollar and push the GBP/USD pair.
Economic indicator
BRC department store price index (annual)
the British Retail Consortium (BRC) The Shop Price Index measures price changes at popular retail outlets in the UK. Changes in the SPI are widely followed as an indicator of inflationary pressures. A high reading is considered positive (or bullish) for the GBP, while a low reading is considered negative (or bearish).
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Latest version:
Tuesday 06 January 2026 00:01
repetition:
monthly
actual:
0.7%
consensus:
–
former:
0.6%
source:
British Retail Consortium
