The British Pound recently encountered resistance near the 1.3700 level against the US Dollar but remained resilient despite facing significant selling pressure. The currency’s attempt to push higher was met with strong offers, limiting its gains despite a broadly weaker US Dollar during a week characterized by heightened US economic data. The GBP/USD pairing found support in part from a robust recovery earlier in the week, following a descent to around 1.3509, with the pair briefly challenging the 1.3700 level before encountering renewed supply.
The US Dollar experienced fluctuations driven by multiple factors. The release of stronger-than-anticipated US employment data, with non-farm payrolls rising by 130,000 in January compared to expectations of 70,000, helped mitigate some of the earlier dollar weakness. Notably, the unemployment rate declined slightly to 4.3%. This solid labor report is seen as reducing the likelihood of an imminent Federal Reserve rate cut, influencing market expectations and supporting USD against other major currencies.
Meanwhile, in Japan, geopolitical developments and monetary policy outlooks influenced the Yen’s strength. Prime Minister Sanae Takaichi’s electoral victory and the potential for forex intervention prompted a shift in the Yen’s value, affecting the USD/JPY cross and indirectly supporting the US dollar’s rally. Additionally, dovish signals emanating from the Federal Reserve, combined with concerns about US inflation remaining subdued, lent some downward pressure to the dollar in the broader context.
In the UK, economic indicators and political developments contributed to the currency’s struggles. Data from the Office for National Statistics revealed that UK GDP growth in the fourth quarter was only 0.1%, softer than the expected 0.2%. Political tensions surrounding Prime Minister Keir Starmer’s administration, notably controversy over appointments linked to sensitive disclosures, added to the negative sentiment, pressuring the Pound further.
On Friday, US inflation data offered some relief for the dollar, with the Consumer Price Index decreasing to 2.4% in January from 2.7%, below market estimates. This smaller-than-anticipated rise in inflation limited the USD’s gains, allowing GBP/USD to stabilize above 1.3600 as markets prepare for key UK economic releases in the upcoming week. With the US markets closed Monday and Chinese traders absent during the Lunar New Year holiday, trading volumes are expected to be thin, potentially amplifying volatility in the near term.
