**GBP/USD Pressured by Robust US PMI Data: Pound to Dollar Forecast**
*Based on original reporting by James White, 7 January 2026, for ExchangeRates.org.uk*
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The GBP/USD currency pair has come under renewed downward pressure, influenced significantly by stronger-than-expected US economic data. As market participants digest these developments, the Pound Sterling’s outlook against the US Dollar is being recalibrated, with analysts scrutinizing implications for monetary policy, economic growth, and broader risk sentiment.
This in-depth analysis will cover:
– Recent price action and technical levels for GBP/USD
– Highlights from the US ISM Services PMI data
– Reactions in global markets and key drivers
– Insights from institutional forecasts and currency strategists
– What to watch ahead for the Pound and the Dollar
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## GBP/USD: Recent Price Action and Technical Assessment
Over the past week, Sterling has fallen against the US Dollar, pressured by persistent strength in US economic activity and continued caution over UK growth prospects. The pair opened the week around 1.2710 but soon found itself retreating as US data overshadowed UK releases.
Key technical observations:
– **Short-term Support and Resistance**: Initial support near 1.2630 proved critical, but breaches below this level opened the door for further losses. Resistance is now clustered near 1.2720 and the 200-day moving average.
– **Medium-term Trend**: The pair remains within a broader, choppy sideways trend established over recent months, lacking sustained momentum in either direction. However, the downside bias has grown as US data outperform expectations.
– **Moving Averages and Momentum**: GBP/USD slipped below its 20-day and 50-day moving averages, reinforcing a bearish technical outlook in the near term. Momentum indicators such as the Relative Strength Index (RSI) also confirm growing selling pressure.
Market participants are now closely watching for further technical confirmation of a breakdown, with the next leg potentially targeting the 1.2550-1.2600 region if Dollar strength persists.
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## US ISM Services PMI Surprises to the Upside
A catalyst for the most recent bout of Sterling weakness was the release of robust US ISM Services PMI data. The figure for December came in substantially above consensus forecasts, pointing to ongoing resilience in the world’s largest economy.
**Key Details From the ISM Services PMI Report:**
– **Headline figure**: ISM Services PMI rose to 53.6 (expected 52.5, prior 52.7). This is the highest level in several months and comfortably above the 50.0 expansionary threshold.
– **Subcomponents**:
– **Business Activity**: Accelerated, indicating strong demand for services.
– **New Orders**: Rose sharply, suggesting future output will remain robust.
– **Employment**: Edged up, hinting at ongoing labour market resilience.
– **Prices Paid**: Remained elevated, underlining continued upward pressure on input costs and potentially inflationary concerns.
Analysts highlighted that the ISM report reinforces the narrative of a “soft landing” for the US economy and reduces pressure on the Federal Reserve to cut rates in the near term. The immediate reaction in the FX market saw the Dollar rally against major counterparts, with Cable (GBP/USD) leading the declines among the G10 group.
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## Global Market Reactions and Macro Backdrop
The outsized ISM print reverberated across asset classes, from currencies and bonds to equity markets and commodities.
**Immediate Market Responses:**
– **USD Index (DXY)**: The greenback moved higher, climbing above 104 on the DXY and reaching multi-week highs.
– **US Treasury Yields**: Two-year and ten-year yields surged as traders re-priced the path of US rate cuts, pushing expectations for an initial easing further out on the calendar.
– **Equity Markets**: US stocks showed
Read more on GBP/USD trading.