GBP/USD surges to 1.3600, hits four-month high as Dollar selling intensifies
- GBP/USD surges to the 1.3600 area, hitting its highest level since September 2025.
- Strong UK PMI and Retail Sales data lift Sterling, cooling near-term BoE rate cut bets.
- The US Dollar remains under broad-based pressure amid trade, policy and Fed-credibility concerns.
The British Pound (GBP) continues to outperform the US Dollar (USD) on Friday, with GBP/USD climbing to the 1.3600 handle as the Greenback remains under broad-based selling pressure. At the time of writing, the pair is up nearly 0.73% on the day, marking its highest level since September 18, 2025.
Sterling is also drawing support from stronger-than-expected UK economic data, which has tempered near-term rate cut expectations at the Bank of England (BoE).
The flash Composite Purchasing Managers Index (PMI) rose to 53.9 in January from 51.4, with the Services PMI jumping to 54.3 from 51.4, while the Manufacturing PMI improved to 51.6 from 50.6. On the consumer side, Retail Sales rose 0.4% MoM in December, rebounding from a 0.1% decline in November, while annual sales accelerated to 2.5% from 1.8%.
Meanwhile, a mixed set of US economic data failed to stem the bearish sentiment toward the Greenback. Markets remain wary that US President Donald Trump’s disruptive trade agenda and repeated use of tariffs as a policy weapon are eroding investor confidence in US assets.
Concerns are also growing over political interference in the Federal Reserve’s (Fed) independence, amid an ongoing Supreme Court case involving Fed Governor Lisa Cook, after President Donald Trump attempted to remove her over mortgage-fraud allegations.
At the same time, reports that US prosecutors have launched a criminal inquiry into Fed Chair Jerome Powell related to his congressional testimony on the central bank’s renovation project have added to investor unease over the credibility and independence of US monetary policy.
These concerns are fueling debasement fears and encouraging investors to rotate out of the US Dollar into other G10 currencies.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 98.76, hovering near its lowest level since October 3.
Meanwhile, sustained expectations that the Fed will deliver two interest rate cuts this year are adding to the downside pressure on the Greenback.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.