• The GBP/USD pair has remained stable around and below the 1.2500 support level, reinforcing the strong bearish dominance.
• Meanwhile, we continue to anticipate more selling opportunities.
• Correspondingly, factors driving the US Dollar's strength persist and are increasing. In recent trading, the GBP/USD pair declined to the support level of 1.2475, the currency pair's lowest level in seven months, before stabilizing around 1.2530 at the time of writing this analysis, ahead of the release of the weekly US jobless claims data and amidst the British Christmas holiday.

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The UK Economy Continues to Struggle

According to economic data, UK GDP remained unchanged for the third quarter of 2024 compared to the previous estimate of 0.1% growth. There was also a slight downward revision for the second quarter, with annual GDP growth remaining stable at 0.9%. The services sector failed to grow during the quarter, while a 0.7% increase in construction output was offset by a 0.4% decrease in manufacturing. According to the Centre for Economics and Business Research, "This data revision adds further evidence to the view that the UK economy is struggling for momentum and will be a blow to the new government, having made growth a political priority." As a result, the research centre expects GDP growth of 0.9% this year and 1.3% for 2025.

Generally, financial markets are currently pricing in two interest rate cuts by the Bank of England for 2025.

UK stocks continue to rebound

In recent trading, the FTSE 100 index of UK equities held onto its gains and closed 0.5% higher at 8140 in Tuesday's session, extending the recovery from the previous session. Its gains were supported by most major sectors as investors continued to assess the overall growth outlook for 2025. Trading saw strong gains in shares of major banks, energy producers, and mining companies, with shares of HSBC, Shell, and Glencore rising by nearly 1%.

Meanwhile, AstraZeneca shares closed above the flat line. On the other hand, construction companies underperformed, pressured by a 16% decline in shares of Vistry outside the FTSE 100 amid another profit warning. Overall, the London Stock Exchange will reopen on Friday due to the Christmas and Boxing Day holidays. The FTSE 100 index is expected to close the year more than 5% higher, the fourth consecutive annual increase and the highest since 2021.

Regarding US equity indices, the Dow Jones Industrial Average rose 177.64 points to 43,084.59. The S&P 500 index rose 43.11 points to 6,017.18, while the Nasdaq Composite rose 210.74 points to 19,975.62.

Trading Tips:

The GBP/USD pair will remain under pressure until there is clarity regarding Trump's official policies, as well as signals from central banks about the path of their policy for the new year.

Technical Analysis for the GBP/USD pair today:

Our technical outlook for the GBP/USD pair remains bearish, and the stability around and below the 1.2500 support level increases the bears' dominance over the trend and indicates a stronger downward movement until technical indicators reach oversold levels, led by the Relative Strength Index and the Stochastic oscillator. Until then, bears should target the support levels of 1.2460 and 1.2350, respectively. Conversely, on the same timeframe, the daily chart will not see an initial break of the trend without moving above the resistance of 1.2850 again. Ultimately, performance will remain within narrow ranges until the markets return to full operation after the Christmas holidays.

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