GBP/USD remains subdued around 1.2300 after rebounding from 14-month lows, US NFP eyed
GBP/USD continues to decline as concerns over the UK’s fiscal and inflation outlook intensify.
The British Pound failed to gain support, even amid a surge in long-term UK bond yields.
The US Nonfarm Payrolls is expected to decrease to 160K in December, down from the previous 227K.
GBP/USD remains subdued for the fourth successive day, trading around 1.2300 during the Asian session on Friday. The GBP/USD pair dropped to 1.2238 on Thursday, marking its lowest level since November 2023, as the Pound Sterling (GBP) struggled under mounting concerns about the United Kingdom’s (UK) fiscal and inflation outlook, which weighed heavily on investor sentiment.
Despite a surge in long-term UK bond yields— with the 30-year yield hitting its highest level since 1998 and the 10-year yield reaching levels last seen in 2008—the British Pound failed to find support. Typically, higher yields strengthen a currency, but in this case, the decline reflects capital flight driven by fears of persistent inflation and fiscal instability.
On Thursday, UK Chief Secretary to the Treasury Darren Jones stated that UK financial markets are continuing to function in an "orderly way." However, markets reacted by selling the Pound Sterling further and increasing expectations of additional rate cuts by the Bank of England (BoE) later this year.
Additionally, the downside risks for the GBP/USD pair increased as the US Dollar (USD) gained support from hawkish Federal Open Market Committee (FOMC) Meeting Minutes and uncertainties surrounding tariff plans proposed by the incoming Trump administration. The US Dollar Index (DXY), which tracks the USD’s performance against six major currencies, remains steady above 109.00 at the moment of writing.
The latest FOMC Meeting Minutes indicated that policymakers agree that the process could take longer than previously anticipated due to recent hotter-than-expected readings on inflation and the effects of potential changes in trade and immigration policy under President-elect Trump’s administration.
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