GBP/USD is currently positioned between 1.3450 and 1.3460, having encountered resistance once more at the 1.3534–1.3535 level. The mentioned level represents the highest point in the last three months and marks the upper boundary of the ongoing ascending channel. The pair currently rests just below the nine-day EMA at 1.3462, maintaining a position significantly above the 50-day EMA located around 1.3351 and above the ascending channel support. From a technical perspective, this represents a typical late-trend pause: a modest pullback within a bullish framework, rather than a confirmed peak. Provided that the spot remains above 1.3350 and continues to operate within the channel, the outlook suggests another effort towards 1.3535, with a possible extension reaching 1.3600. Throughout the entire year, GBP/USD experienced an increase of approximately 8%, rising from the low-1.24s range to conclude near 1.35. During the initial months of 2025, the pair reached a peak of 1.38, marking its highest point in over three years, prior to the dollar’s stabilization which limited additional gains. The shift was not merely a remarkable narrative; the overall US dollar index experienced a decline of approximately 9% in 2025, marking its steepest annual drop since 2017. The composite picture is significant: despite the recent decline to 1.3450, cable is concluding the year solidly in the upper half of its 2025 range, maintaining the uptrend, although it lacks the momentum previously observed above 1.37.
The dynamics of US monetary policy significantly influenced GBP/USD over the course of the year. The Federal Reserve maintained the funds rate at 4.50% for the initial eight months, subsequently implementing three reductions from September to December, which lowered the target band to 3.75%. The 75 basis points of easing, along with the market’s anticipation of further cuts under a Trump administration, played a crucial role in the dollar’s 9% decline. The political landscape intensified that susceptibility: the US president consistently criticized the Fed Chair for not implementing cuts more swiftly and openly advocated for a more accommodating leadership approach. Following the resignation of Governor Kugler and the entry of Miran into the FOMC advocating for more significant cuts, the markets began to anticipate a fundamentally more accommodative policy trajectory. A new Fed Chair is set to assume office in May, and market participants anticipate that this individual will adopt a dovish stance, maintaining a downward tilt on medium-term dollar risk, despite a temporary halt in near-term repricing. The recent macroeconomic data from the US presents a mixed outlook for the USD, lacking a definitive advantage. On one side, GDP expanded by 4.3% in the latest reported quarter, clearly stronger than earlier expectations and supportive for the dollar on growth differentials. The housing data indicated that the house price index increased by 1.3% month-on-month in October, following a previous rise of 1.4%, and showed a year-on-year increase of 1.7%. This trend aligns with a stable property market that is firm yet not overheating, as mortgage rates continue to decline. In November, both headline and core CPI experienced a significant decline, indicating that the Federal Reserve’s previous tightening measures, along with base effects, are now having a noticeable impact. The overall impact on GBP/USD indicates that while US growth is stable, the prevailing inflation trend suggests, and political pressures nearly necessitate, additional cuts in 2026. The interplay of these factors limits the potential for the dollar to gain during rallies and reinforces the notion that a prolonged decline in cable will require either a specific shock from the UK or a broader global risk-off sentiment.
In the UK, the Bank of England implemented four rate cuts in 2025, reflecting increased confidence in the easing of domestic inflation pressures. Despite this, noticeable divisions emerged within the committee, as hawkish members remained concerned about ongoing core inflation pressures. Current market expectations indicate two additional cuts from the BoE next year, which restrains the yield advantage of the GBP. Concerns regarding the UK’s public finances have persisted at the fiscal level. Concerns regarding potential tax increases in the Autumn 2025 budget and their impact on growth have occasionally pressured sterling, particularly during spikes in gilt yields that brought back memories of 2022. The distinction compared to 2022 lies in size and control: there was an absence of a new “mini-budget panic,” no chaotic decline in UK bonds, and no compelled intervention by the BoE. Short positioning that developed due to those concerns was partially unwound as the year concluded, aiding GBP/USD in its recovery towards 1.35. Overall, sterling does not qualify as a “safe haven” currency; however, it is also not priced for disaster at this time.
The path of GBP/USD throughout 2025 is crucial for contextualizing the present range. During the initial half, the pair surged to approximately 1.38 due to US tariffs and uncertainty surrounding Fed policy negatively impacting the dollar, while markets looked forward to a clearer narrative of disinflation in the UK. In the latter half, the Fed initiated cuts; however, overall risk sentiment turned more prudent, concerns regarding UK growth reemerged, and sterling struggled to breach the 1.38–1.40 range. The pair experienced a downward trend, fluctuating in the last months between approximately 1.3350 and 1.3535, with the 1.3450–1.3460 area serving as a pivotal point. Concluding the year at approximately 1.35 following an 8% increase is impressive; however, the inability to maintain proximity to 1.38 indicates that buyers are losing their grip, highlighting the necessity for new catalysts to achieve a breakthrough towards 1.40. On the daily chart, GBP/USD remains in an uptrend; however, the momentum has diminished. The price is slightly under the nine-day EMA at 1.3462, indicating a temporary decline in momentum, but it is still well above the 50-day EMA near 1.3351. The slope of the 50-day EMA remains upward, and the spot is trading within a rising channel, indicating that the prevailing trend on the short-to-medium term is bullish. The 14-day RSI at approximately 61 highlights this point: the oscillator remains in a positive territory, is not overbought, and is far from capitulation levels. This configuration generally indicates a bullish trend that is experiencing a pause rather than a reversal. From a purely trend-following viewpoint, the critical threshold is clear: above 1.3350, any dips are merely noise in an upward market; below 1.3350, the likelihood of a more significant correction towards 1.3010 increases substantially.