The GBP/USD pair turned negative on Wednesday following comments by US President Donald Trump in Davos, who said he would not use excessive force to seize Greenland. At the time of writing, the pair is trading at 1.3433, down 0.03%.
Sterling fell as improving risk sentiment offset hotter UK inflation and less pressure on the dollar.
Market sentiment improved after Trump’s statements in Davos. Despite his insistence on negotiating with Denmark, he refrained from using the word tariffs, which he used over the weekend when he imposed 10% duties on eight European countries, including Denmark.
Economic data has taken a back seat to geopolitical issues, which have so far subsided following Trump’s speech. Data-wise, pending home sales for December in the US fell 9.3%, less than expectations for a 0.3% contraction and down from 3.3% growth in November.
Across the continent, UK inflation rose above estimates of 3.3%, reaching 3.4% year-on-year in December, driven by airfares and tobacco prices. Although inflation got a bit hot, it remained below the Bank of England’s forecast of 3.5%.
Despite this, financial markets continued to price in 47 basis points of monetary easing by the Bank of England towards the end of the year, according to the European Central Bank report. Main market station Data.
A day earlier, the Office for National Statistics (ONS) revealed that the labor market weakened in November, which could prompt the Bank of England to cut interest rates to support the economy.
During this week, the UK’s economic agenda will be absent. The US docket will include the release of third-quarter 2025 gross domestic product (GDP), initial unemployment claims and the personal consumption expenditures (PCE) price index.
The price of the pound sterling this week
The table below shows the percentage change in the British Pound (GBP) against the major currencies listed this week. The British pound was the strongest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -1.01% | -0.60% | 0.27% | -0.75% | -1.39% | -1.79% | -0.87% | |
| euro | 1.01% | 0.41% | 1.28% | 0.25% | -0.41% | -0.80% | 0.13% | |
| GBP | 0.60% | -0.41% | 0.62% | -0.16% | -0.81% | -1.20% | -0.28% | |
| JPY | -0.27% | -1.28% | -0.62% | -1.00% | -1.64% | -2.02% | -1.12% | |
| Canadian | 0.75% | -0.25% | 0.16% | 1.00% | -0.62% | -1.03% | -0.12% | |
| Australian dollar | 1.39% | 0.41% | 0.81% | 1.64% | 0.62% | -0.39% | 0.54% | |
| New Zealand dollar | 1.79% | 0.80% | 1.20% | 2.02% | 1.03% | 0.39% | 0.93% | |
| Swiss franc | 0.87% | -0.13% | 0.28% | 1.12% | 0.12% | -0.54% | -0.93% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the British pound from the left column and move along the horizontal line to the US dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
GBP/USD Price Forecast: Technical Outlook
The British pound failed to extend its uptrend on Wednesday, consolidating within the 200-day SMA and 20-day SMA at the 1.3403 and 1.3455 ranges respectively, as the dollar pared some of its earlier losses. However, buyers are still in control as the Relative Strength Index (RSI) is bullish, but has turned flat, which is an indicator of sideways price movement.
If GBP/USD breaks above the 20-day SMA at 1.3455, the next major resistance will be the January 20 high at 1.3491, ahead of 1.3500. Breaking the latter will reveal the January 6 peak at 1.3567. Conversely, if the pair falls below the 200-day SMA, the next support will be the swing low recorded on January 19 at 1.3338.
Frequently asked questions about the pound sterling
The British Pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most popular foreign exchange (FX) trading unit in the world, accounting for 12% of all transactions, averaging $630 billion per day, according to data for 2022. The main trading pairs are GBP/USD, also known as “Cable”, which accounts for 11% of FX, GBP/JPY, or “Dragon” as traders know it (3%), and EUR/GBP (2%). The pound sterling is issued by the Bank of England (BoE).
The single most important factor affecting the value of the pound sterling is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on whether it has achieved its primary objective of “price stability” – a stable inflation rate of around 2%. The primary tool for achieving this is adjusting interest rates. When inflation is too high, the Bank of England will try to rein it in by raising interest rates, making it more expensive for individuals and businesses to obtain credit. This is generally positive for the pound, as higher interest rates make the UK a more attractive place for global investors to put their money. When inflation falls to a very low level, it is a sign that economic growth is slowing. In this scenario, the Bank of England would consider lowering interest rates to reduce the cost of credit so that companies borrow more to invest in growth-generating projects.
Data releases measure the health of the economy and can affect the value of the British pound. Indicators such as GDP, manufacturing PMIs, services and employment can all influence the direction of the pound. A strong economy is good for the pound. Not only does it attract more foreign investment, but it may encourage the Bank of England to raise interest rates, which will directly strengthen sterling. Otherwise, if economic data is weak, the British pound is likely to fall.
Another important data release for the British Pound is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a certain period. If a country produces highly sought-after exports, its currency will take full advantage of the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
