Sterling Fails to Capitalize on Gains, Held Back by Robust US Dollar

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The GBP/USD pair struggles to build on Friday's modest recovery and trades in a narrow range above the 1.2400 level as the week begins.

Spot prices remain near their lowest point since April 2024, reflecting a three-month downward trend driven by a strong US Dollar (USD).  

The USD Index (DXY), which measures the Greenback's strength against a basket of major currencies, hovers near a two-year high.

This is supported by optimism surrounding US President-elect Donald Trump's expansionary policies and the Federal Reserve's (Fed) hawkish stance. 

Additionally, concerns about Trump's proposed tariffs, ongoing geopolitical risks from the Russia-Ukraine conflict, and escalating tensions in the Middle East further bolster the USD's safe-haven appeal, creating headwinds for the GBP/USD pair.  

On the other hand, the British Pound (GBP) faces persistent pressure due to a series of disappointing UK economic data and uncertainties regarding the fiscal policies of the newly elected Labour government.

Moreover, the Bank of England's (BoE) dovish approach, highlighted by its split vote to keep interest rates unchanged in December, adds to the negative sentiment.

This reinforces the bearish outlook for GBP/USD as traders await the release of the final UK Services PMI for further direction.

Paraphrasing text from "FXSTREET" all rights reserved by the original author.