• The Pound Sterling struggles to extend Friday’s gains, which came after strong UK Retail Sales and PMI data.
• Investors expect the White House to reveal the Fed’s new Chairman this week.
• The Fed is expected to keep interest rates unchanged on Wednesday.

The Pound Sterling (GBP) trades lower against its major currency peers, outperforming North American peers on Monday. The British currency steadies after a sharp rally on Friday, which was prompted by strong United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI) preliminary data for January and upbeat Retail Sales data for December.

The data released on Friday showed that UK private business activity expanded at a faster pace due to strong manufacturing and services PMI. The UK Composite PMI came in at 53.9 in January, higher than estimates of 51.7 and the prior release of 51.4.

Meanwhile, the UK Office for National Statistics (ONS) reported that Retail Sales returned to growth in December after declining in the previous two months. Retail Sales rose by 0.4%, while it was expected to have declined 0.1% again.

This week, the UK economic calendar will be light; therefore, market sentiment and speculation ahead of the Bank of England’s (BoE) monetary policy meeting in February will be key drivers for the Pound Sterling.

In the December policy meeting, the BoE guided that monetary policy will remain on a “gradual downward path”. Meanwhile, BoE Monetary Policy Committee (MPC) member Megan Greene stated on Friday that the UK central bank should avoid reducing interest rates, like the Federal Reserve, citing upside wage growth expectations.

"I will be watching household and business inflation expectations over the next few months to see if they come down in line with lower inflation outturns. Even more concerning, in my view, are the forward indicators for wage growth," Greene said, Reuters reported.

Daily Digest Market Movers: Investors await new Fed Chairman's announcement

• The Pound Sterling ticks marginally higher against the US Dollar during the European trading hours on Monday. The GBP/USD pair edges up as the US Dollar underperforms across the board, with the US Dollar Index (DXY) trading 0.3% lower near 97.15 as of writing. A slight uptick in the GBP/USD pair at times when the US Dollar is sharply lower signifies that the Pound Sterling is also weak.
• The US Dollar faces severe selling pressure on hopes that the White House could announce the name of the Fed’s next Chairman this week. United States (US) President Donald Trump said in December that he would announce the name of Fed Chair Jerome Powell’s successor sometime in January.
• According to recent comments from White House officials, National Economic Council Director Kevin Hassett, BlackRock executive Rick Rieder, current Fed Governors Christopher Waller and Michelle Bowman, and former Fed Governor Kevin Warsh are top contenders to replace Powell.
• Investors worry that the Fed would lose its independence after the appointment of a Trump candidate as Fed Chairman. In the past, Trump has criticized Powell for not lowering interest rates and has also imposed criminal charges for renovation cost overruns. Therefore, it is highly anticipated that decisions taken by the new Chairman will be biased towards Trump’s economic agenda.
• This week, investors will also focus on the Fed’s monetary policy announcement on Wednesday. According to the CME FedWatch tool, the Fed is expected to announce a pause after three consecutive interest rate cuts. In the last three policy meetings of 2025, the Fed reduced borrowing rates by 75 basis points (bps) to the 3.50%-3.75% range, citing labor market risks.
• In Monday’s session, investors will focus on US Durable Goods Orders data for November, which will be published at 13:30 GMT.

Technical Analysis: GBP/USD aims to extend advance to near 1.3790

GBP/USD trades higher at around 1.3670 as of writing. Price action holds well above the rising 20-day Exponential Moving Average (EMA), which has advanced to 1.3474 and underpins the bullish structure. The average has turned higher in recent sessions, reinforcing a positive trend bias. The Relative Strength Index (RSI) at 71.11 (overbought) signals stretched momentum and warns of scope for consolidation.

While above the 20-day EMA, pullbacks could remain contained and the uptrend could extend. A dip in RSI back below 70 would indicate momentum cooling and increase the risk of a pause.

(The technical analysis of this story was written with the help of an AI tool.)