Pound Drops Ahead of US Jobs Data
The Pound Sterling (GBP) declined to near 1.3190 against the US Dollar (USD) during Tuesday’s European trading session. The GBP/USD pair fell as the US Dollar extended its recovery from Monday, despite weak ISM Manufacturing PMI data for November from the United States.
At the time of writing, the US Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, rose 0.1% to approximately 99.50.
Monday’s data revealed that manufacturing activity in the United States contracted for the ninth consecutive month. The pace of contraction was sharper than expected, with the Manufacturing PMI falling to 48.2—below both the forecast of 48.6 and October’s reading of 48.7.
Subcomponents such as New Orders and Employment Indexes also posted significant declines, reinforcing the view of a weak demand environment. This backdrop supports expectations for further interest rate cuts by the Federal Reserve.
Traders are increasingly confident that the Fed will cut rates again in December. The central bank has already lowered the Federal Funds Rate by 75 basis points this year, bringing it to the 3.75%–4.00% range. According to the CME FedWatch tool, there is an 87.2% probability of a 25 basis point cut to 3.50%–3.75% at the upcoming policy meeting.
The Pound also faces pressure from domestic policy signals. United Kingdom Prime Minister Keir Starmer emphasized the need to reduce inflation and interest rates to stimulate business investment and economic growth. Speaking to reporters on Monday, Starmer stated:
“The most important things we can do for growth and business are to drive inflation down so that interest rates fall further, reducing the cost of investment.”
These remarks came in support of the Autumn Budget presented by Chancellor Rachel Reeves last week, which included plans to raise taxes by £26 billion by 2029–30 to address the fiscal gap.
The prospect of lower interest rates in the United Kingdom weighs negatively on the Pound Sterling. Meanwhile, markets expect the Bank of England (BoE) to cut rates this month amid signs of labor market weakness and slowing inflation. However, BoE policymaker Megan Greene noted she would only support rate cuts if employment and consumption deteriorate further.
On the daily chart, GBP/USD trades at 1.3211, holding slightly above the rising 20-day Exponential Moving Average (EMA) at 1.3187. The EMA has begun to slope upward after a flattening phase, signaling improving trend conditions.
The 14-day Relative Strength Index (RSI) stands at 51.24, indicating neutral momentum. A recent breakout above the descending trendline from 1.3726, confirmed at 1.3085, suggests a shift in bias. As long as buyers defend higher lows, dips are likely to remain contained. A pullback toward 1.3085 may attract demand, while a daily close below that level could invalidate the bullish bias and risk a deeper retracement toward the psychological 1.3000 mark.