USD: Cable pullback looks more technical than macro-led

GBP/USD has eased back from its Christmas Eve peak at 1.3535, probing 1.3435 on Monday. Some desk chatter links the move to a firmer dollar on the back of recent US foreign policy headlines, but the broader risk backdrop does not fully support a classic flight-to-safety narrative, equities remain buoyant.

Our read is that this is a post-rally reset. Daily momentum looked stretched into the highs, with the RSI pushing up towards overbought territory, and the subsequent dip is consistent with an unwind rather than a regime shift. Near-term, a drift towards the 100-day EMA around 1.3340 looks plausible if the pair continues to bleed excess froth.

GBP: Domestic calendar is quiet, leaving sterling to trade the global tape

There is little on the UK data front to steer sterling this week, which keeps the focus on positioning, risk tone and US releases. With global equities holding firm, sterling’s broader bias remains supported, but the lack of home-grown catalysts also means the market can lean on technical levels and short-term flows.

EUR: GBP/EUR breakout in play, Eurozone inflation is the key test

Sterling is pressing higher versus the euro, with GBP/EUR pushing to around 1.1495, its best since October, after finally clearing the 100-day EMA near 1.1470. That break strengthens the near-term setup and keeps 1.1520 in view as the next notable technical area.

Eurozone CPI is due Wednesday, with consensus looking for 2.4% y/y, and German CPI on Tuesday is likely to set the tone. A firmer inflation print would reinforce the market’s bias that the ECB is in no hurry to ease further, which would be supportive for front-end yields and, by extension, the euro. That said, with ECB expectations already well embedded, any knee-jerk EUR reaction may fade quickly, leaving global sentiment to remain the main driver for the cross.

Looking ahead

• US data in focus: ISM manufacturing (Monday) and services (Wednesday), with the employment component watched closely for labour-market cooling signals.

• Labour indicators: JOLTS (Wednesday) and non-farm payrolls (Friday), with a softer print likely to revive Fed cut pricing and weigh on the dollar, while an upside surprise could extend the USD’s early-January bounce.

• Key levels: GBP/USD support focus near 1.3340 (100-day EMA). GBP/EUR upside attention towards 1.1525 following the break above the 100-day EMA.