The Pound Sterling (GBP) staged a significant recovery on Monday during the European session, rebounding from an opening low near 1.3390 to trade around 1.3465 against the US Dollar (USD). This upward movement in the GBP/USD pair was driven by a sharp correction in the US Dollar. The Dollar Index (DXY) retreated by 0.3% to near 98.80 after previously hitting a monthly high of 99.25.
TheGreenback’s weakness follows the opening of a criminal investigation into Federal Reserve Chair Jerome Powell. Over the weekend, the US Department of Justice issued a subpoena related to Powell’s spending records for the Washington headquarters reconstruction and his June 2025 Senate testimony.
Powell responded by terming the investigation a “pretext,” arguing that the threat of charges is a consequence of the Fed prioritizing the public interest over presidential preferences when setting interest rates. Market experts view this development as an escalation of the ongoing feud between Powell and President Donald Trump regarding interest rate policies. Concerns are growing that this conflict could seriously undermine the Federal Reserve’s autonomy, a scenario that is negative for the US Dollar
Market Movers Daily: Bostic Highlights Inflation Concerns
UK Outlook: Labor Market Data Takes Center Stage This week, the Pound Sterling’s trajectory will be heavily influenced by the UK’s employment data for the three months ending in November, set for release on Tuesday. Investors are keenly awaiting this data for new insights into the Bank of England’s (BoE) monetary policy stance. Throughout 2025, concerns about the UK labor market have persisted, with companies hesitant to hire aggressively due to the rising costs of employer social security contributions. Adding to this narrative, a recent survey by the REC and KPMG indicated that while labor demand remained soft in December, wage growth saw an acceleration.
US Outlook: CPI Data to Drive Dollar After Mixed NFP Following Friday’s mixed Nonfarm Payrolls (NFP) report—which showed a sharp drop in the unemployment rate to 4.4% but weaker-than-expected hiring at 50K—the US Dollar’s next major catalyst will be Tuesday’s Consumer Price Index (CPI) data. Investors will scrutinize this inflation report for fresh signals on the Federal Reserve’s interest rate path. In 2025, the Fed implemented three 25 basis point rate cuts to support the labor market, despite inflation remaining persistently above its 2% target. Emphasizing this challenge, Atlanta Fed President Raphael Bostic recently stated that inflation remains “too high” and asserted the Fed’s need to get it “under control.”
GBP/USD finds buyers beneath its 20-day EMA
GBP/USD Technical Outlook: Bulls Eye Key Retracement Level GBP/USD is trading higher around 1.3465, maintaining a bullish posture as it holds above the rising 20-day Exponential Moving Average (EMA) at 1.3438. The 14-day Relative Strength Index (RSI) has turned higher to reach 53, confirming steady upward momentum.
Key Levels to Watch:
- Immediate Resistance: The 61.8% Fibonacci retracement level (measured from the 1.3794 high to the 1.3014 low) at 1.3496 is the primary hurdle. A decisive break above this point would signal a potential reversal of the broader downtrend and open the door for a move towards the September 17 high of 1.3726.
- Downside Risk: Failure to clear the 1.3496 resistance would likely keep the pair range-bound. A drift back toward the 50% retracement level at 1.3404 would dampen current momentum and maintain the rebound within a tighter range.
