• GBP/USD is trading around 1.2570 as volume remains low during the holiday week.
• The US Dollar Index DXY remains stable around 108.15, showing little movement.
• Gradual reductions in interest rates by the Fed weigh on the dollar.

GBP/USD saw a moderate raise to 1.2550 as the market sees low trading volume this week due to the upcoming Christmas holidays. The pair is consolidating with minimal price action as the market adjusts to the tranquil holiday season. Similarly, the US Dollar Index (DXY) remains largely flat and hovers above 108.00, showing no significant change pending further economic data.

More broadly, the US dollar remains forceful. Expectations for a slower rate of interest rate cuts from the Federal Reserve in the coming year continue to support the dollar. Fed officials are signaling a more cautious approach to cutting interest rates, driven by a slower-than-expected disinflation process and continuing uncertainty about fresh policy under President-elect Donald Trump. The Fed’s latest projections suggest the federal funds rate could fall to 3.9% by the end of 2025, pointing to some rate cuts next year but less than markets expected before last week’s decision.

Looking at the economic calendar, jobless claims data will be released on Thursday, with jobless claims expected to decline slightly to 218,000. This may cause some volatility in the US dollar exchange rate. However, despite these factors, the pound remains vulnerable, falling below the key rising trendline around 1.2600 and showing signs of potential further decline. Later, in the first week of January, we’ll take a closer look at December’s U.S. nonfarm payrolls data.

GBP/USD Technical Outlook

GBP/USD continues to be under significant downward pressure. Additionally, the Relative Strength Index (RSI) has fallen below the 40.00 level, making it more likely to fall further if it continues below this level. Moreover, the moving average convergence divergence (MACD) is displaying red bars, suggesting a forceful bearish presence.
On the other hand, the next support level for GBP/USD is apparent around 1.2300. On the other hand, if the pair manages to regain the 1.2600 level, it could signal a rebound. This level will be a key point to watch for potential upside momentum.