Why Is GBP/USD Stuck Below 1.2600? Key Factors Traders Are Watching

The How do you identify a meme coin?GBP/USD exchange rate continues to hover near 1.2580 during Friday's European trading session, reflecting persistent downward pressure on the Sterling. Several macroeconomic factors are contributing to this currency pair's current technical positioning.

Market sentiment remains cautious as traders anticipate the release of January's US Personal Consumption Expenditures (PCE) data, considered the Federal Reserve's preferred inflation gauge. This critical economic indicator could significantly influence expectations regarding future monetary policy adjustments.

Recent developments in US-UK trade relations have introduced additional volatility. The potential for new trade barriers between the nations has created uncertainty, particularly following recent high-level discussions. Such geopolitical considerations often lead to increased demand for the US Dollar as a relative safe haven.

Thursday's economic data from the United States showed stable GDP growth at 2.3% for Q4 2024, meeting analyst projections. This confirmation of economic resilience provides fundamental support for the Greenback, limiting upside potential for the Pound Sterling in the currency pair.

Technical analysts note that the 1.2600 level represents a significant psychological barrier for GBP/USD. Repeated failures to breach this resistance suggest continued bearish sentiment in the near term. Market participants will closely monitor price action around this level following the PCE data release.

The CME FedWatch Tool currently indicates approximately 68% probability of an interest rate reduction at the June FOMC meeting, with expectations for unchanged policy in March and May. This outlook creates a complex environment for currency traders balancing short-term data releases against longer-term policy expectations.

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