Sterling Struggles as Robust U.S. Data Strengthens Dollar and Dims Fed Cut Odds
GBP/USD slid to session lows near 1.2481 on Tuesday, pressured by stronger-than-expected U.S. ISM non-manufacturing PMI and JOLTS job openings data. The robust U.S. data reinforced expectations for a higher-for-longer Fed rate path, with futures pricing virtually no chance of a cut at the January 29 meeting and below 50% odds for March. This dollar strength pushed sterling lower, erasing early NorAm gains and leaving the pound near recent trend lows as traders focus on upcoming U.S. data, including jobless claims on Wednesday and payrolls on Friday.
Technical Analysis
Technically, GBP/USD remains under pressure, trading below key resistance levels. Immediate support lies at 1.2481, Tuesday’s low, with additional protection at the lower 30-day Bollinger Band at 1.2402 and the January 2 low at 1.2353. Resistance is clustered at 1.2508 (200-hour moving average) and 1.2575-1.2582, encompassing the January 7 daily high and the 50% Fibonacci retracement of the 1.2811-1.2353 decline. The pair’s inability to reclaim resistance levels suggests further downside risks, particularly as U.S. data continues to favor dollar strength.
Market Outlook
Sterling’s outlook remains constrained by dovish BoE expectations. Futures markets indicate a 68% chance of a February rate cut by the BoE, contrasting with the Fed’s less dovish tone. Inflation data on January 15 for both the UK and U.S. will be pivotal in shaping market expectations, but until then, GBP/USD is likely to remain anchored near trend lows, with a retest of the 1.2353 support likely if U.S. data continues to surprise to the upside.
