GBP/USD moves up to around 1.3460 as the “Sell America” trend picks up speed

GBP/USD Opens Higher as Dollar Weakens Amid Trade Tensions

On Tuesday, GBP/USD started the day with gains as investors continued to move away from the US Dollar and American assets. This trend followed heightened trade tensions between the US and Europe, spurred by recent actions from former President Trump. Additionally, a sell-off in Japanese bonds has contributed to keeping the CBOE Volatility Index (VIX) at its highest levels this year, reflecting a strong sense of risk aversion. The currency pair is currently trading at 1.3463, up by 0.30%.

Sterling Strengthens as Global Uncertainty Prompts Dollar Sell-Off

Market anxiety reached new heights after Bloomberg reported a sudden crash in Japanese bonds, causing significant disruption on trading floors. The article highlighted growing worries about Japan's fiscal outlook, especially in light of Prime Minister Sane Takaich’s proposals to reduce taxes and increase government spending, which have raised questions about the country’s financial stability.

These developments have led to a rise in global bond yields and a decline in the US Dollar, as investors continue to favor non-US assets. The US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, has dropped by 0.53% to 98.50.

Economic Data: US and UK Labor Markets

Recent US employment figures show ongoing job creation, with the ADP Employment Change four-week average increasing by 8,000, though this is lower than the previous week’s addition of 11,750 jobs.

In the UK, labor market data revealed that the unemployment rate held steady at 5.1% for the three months ending in November, slightly above the expected 5%. Meanwhile, average earnings excluding bonuses slipped from 4.6% to 4.5%, marking the slowest growth since April 2022.

Following these reports, financial markets remain confident that the Bank of England (BoE) will keep interest rates unchanged at 3.75% during its February meeting. However, traders are still pricing in a potential 41 basis points of rate cuts by the end of the year.

Meanwhile, UK finance minister Rachel Reeves, speaking in Davos, Switzerland, emphasized the importance of reducing tensions over Greenland, stating, “The future of Greenland is for the people of Greenland.”

GBP/USD Technical Analysis and Outlook

From a technical perspective, GBP/USD has reached a one-week high at 1.3491. However, the pair is likely to remain within a range unless buyers can push it above a significant support or resistance level.

The Relative Strength Index (RSI) indicates a shift in momentum, turning bullish since the start of the week.

• If GBP/USD surpasses 1.3500, the next resistance comes from a descending trendline near 1.3550–1.3575. A break above this area could open the way to 1.3600, followed by the September 17 high at 1.3726.
• On the downside, a drop below 1.3450 would put the 200-day simple moving average (SMA) at 1.3402 in focus. Should weakness persist, the 50-day SMA at 1.3330 would be the next key support level for bulls to defend.

GBP/USD Daily Chart