Sterling Rallies on U.S. PCE Data, Holds Above Trend Lows
GBP/USD rallied sharply on Friday, climbing to 1.2597 after softer-than-expected U.S. core PCE data eased market expectations for Fed rate hikes in 2025. The data dampened the dollar’s strength, helping sterling recover from its recent test of the November trend low at 1.2475. U.S. budget uncertainties and declining Treasury yields further contributed to dollar weakness, supporting cable as it rebounded from multi-week lows. While Fed officials maintained a data-dependent stance, the tempered hawkish tone suggests GBP/USD may avoid retesting recent lows as year-end volatility increases.
Technically, GBP/USD found strong support at 1.2475, with additional downside protection at 1.2446 (May 10 weekly low). Resistance lies at Friday’s high of 1.2613, with the 50% Fibonacci retracement of the 1.2811-1.2475 decline at 1.2643 acting as a key hurdle. Above this, the 30-day moving average at 1.2672 presents a significant barrier for bulls. The pair’s ability to close above the 10-hour moving average at 1.2547 indicates a shift in momentum, but further gains may be limited unless sterling clears key resistance levels.
Looking ahead, year-end liquidity conditions and positioning are likely to dominate price action. While the BoE’s dovish stance may cap gains, the softened Fed tone and lower U.S. yields could provide support for GBP/USD into year-end. Traders should watch for volatility around the 1.2475 support zone and resistance levels near 1.2643-1.2672, as thin liquidity could amplify moves during the holiday season.