Published: 17 December 2025,07:11
Daily Market Analysis New
Key Takeaways:
*GBP/USD climbed to a two-month high near 1.3456, supported by a weaker U.S. dollar and Sterling’s relative yield advantage.
*While labor market data showed rising unemployment and contracting employment, strong PMIs signaled resilient underlying economic activity.
*Today’s inflation print will shape BoE expectations—strong CPI supports Sterling via a more restrictive outlook, while soft CPI risks a pullback ahead of Thursday’s meeting.
Market Summary:
The Pound Sterling has demonstrated notable resilience at the start of the week, maintaining strength against a broadly weaker U.S. dollar despite looming expectations for a Bank of England rate cut on Thursday. GBP/USD has advanced to a two-month high of 1.3456, drawing support from its relative yield advantage and mixed, but ultimately supportive, domestic economic signals.
Recent UK data presented a dichotomy. Labor market figures revealed underlying softness, with the unemployment rate rising to 5.1% and employment continuing to contract. However, this was counterbalanced by a robust set of PMI readings, which surprised to the upside across services, manufacturing, and composite measures, suggesting the underlying pace of economic activity remains firm.
The immediate and decisive catalyst for the currency will be today’s release of the UK Consumer Price Index (CPI). As the final major data point before the Monetary Policy Committee meeting, the inflation print will critically shape market expectations. A reading that exceeds forecasts would likely bolster the case for the BoE to maintain a more restrictive stance, providing immediate support for Sterling. Conversely, a softer inflation figure would solidify expectations for a dovish pivot on Thursday, potentially triggering a corrective pullback.
In summary, Sterling’s near-term trajectory hinges on today’s inflation report, which will act as the primary arbiter between competing narratives of persistent price pressures and emerging economic vulnerabilities ahead of Thursday’s pivotal policy announcement.
Technical Analysis
The GBPUSD pair continues to trade within a robust bullish structure, maintaining its position above a well-defined uptrend support line and recently reaching a two-month high at 1.3456. This price action confirms the underlying strength that has characterized the pair’s performance in recent weeks.
However, a significant technical caution has emerged. While the price has charted a series of higher highs, the Moving Average Convergence Divergence (MACD) indicator is forming a clear pattern of lower highs. This bearish divergence often signals waning underlying momentum and can precede a period of consolidation or trend reversal, introducing a note of caution to the otherwise constructive chart.
In contrast, the Relative Strength Index (RSI) remains perched above its 50 mid-line, suggesting that near-term bullish momentum, while potentially peaking, has not yet decisively broken down. This creates a tension between the still-positive momentum reading and the longer-term warning from the MACD
The immediate focus is the pair’s ability to overcome the current resistance near 1.3425. A failure to achieve a decisive breakout above this level would validate the bearish divergence signal and increase the likelihood of a corrective pullback toward trend support.
Resistance level: 1.3535, 1.3650
Support level: 1.3290, 1.3160
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