GBP/USD reclaims 1.3500 as US Dollar falters on geopolitical shock, weak data

Sterling rallies as risk sentiment improves, the Dollar gives back gains and US ISM data disappoints

Improving market mood pushed the Greenback lower as depicted by the US Dollar Index (DXY). The DXY, which tracks the performance of the American currency against other six, is down 0.03% to 98.39 after being up in the day by 0.40%.

Economic data in the US revealed that business activity contracted for the tenth straight month in December, following the release of the ISM Manufacturing PMI, which dipped from 48.2 to 47.9, missing forecasts of 48.3.

Despite reaching its lowest level since October 2024, the PMI remained above 42.3, a level that ISM said over time is consistent with an expansion of the overall economy. Last December, the latest GDP figures revealed the US economy grew at a 4.3% annualized rate in Q3.

In the meantime, the Minneapolis Fed President Neel Kashkari said that “inflation is still too high,” that he thinks the Fed is closer to neutral, and that the labor market is in a “low-hiring but low-firing” environment.

Geopolitical developments over the weekend kept the Greenback underpinned during most of the Asian and European sessions. Last Saturday, US forces ousted Venezuelan President Nicolas Maduro and his wife, as he faces charges of “over 25 years to traffic cocaine into the US. He and others are accused of partnering with groups including the Sinaloa Cartel and Tren de Aragua, which have been designated by the US as foreign terrorist organizations,” via Bloomberg.

Across the pond, money markets expect the Bank of England to cut rates at least once this year, with a possible second cut towards the year’s end. Capital Edge data shows that the futures market was priced in 41.3 basis points of cuts towards the November 5, 2026, meeting.

Ahead, the UK economic docket is absent, not so in the US, which shows the first formal week, packed with data releases. Traders await the release of the ISM Services PMI, Initial Jobless Claims for the week ending January 3 and December’s Nonfarm Payrolls.

GBP/USD Price Forecast: Technical outlook

The GBP/USD technical picture suggests the pair could extend its gains past December’s peak of 1.3534, opening the door for further upside. If buyers clear 1.3550, expect a test of the 1.3600 mark in the near term. Conversely, if Cable slides below 1.3500, sellers could drive the exchange rate below 1.3400, eyeing a test of the 200-day SMA at 1.3374.

Pound Sterling Price This Month

The table below shows the percentage change of British Pound (GBP) against listed major currencies this month. British Pound was the strongest against the Canadian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.36%	-0.33%	-0.06%	0.47%	-0.63%	0.04%	0.10%
EUR	-0.36%		-0.73%	-0.33%	0.19%	-0.61%	-0.25%	-0.19%
GBP	0.33%	0.73%		0.38%	0.93%	0.12%	0.48%	0.55%
JPY	0.06%	0.33%	-0.38%		0.45%	-0.46%	-0.37%	0.28%
CAD	-0.47%	-0.19%	-0.93%	-0.45%		-0.90%	-0.82%	-0.37%
AUD	0.63%	0.61%	-0.12%	0.46%	0.90%		0.36%	0.43%
NZD	-0.04%	0.25%	-0.48%	0.37%	0.82%	-0.36%		0.06%
CHF	-0.10%	0.19%	-0.55%	-0.28%	0.37%	-0.43%	-0.06%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick 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).