• The Pound Sterling is under pressure against the US Dollar on hopes that the Fed will hold interest rates steady this month.
• Fed’s Schmid stresses the need for a restrictive policy stance, citing inflation risks.
• Investors await UK employment and inflation data, releasing next week.

The Pound Sterling (GBP) trades with caution near its four-week low around 1.3360 against the US Dollar (USD) during the European trading session on Friday. The GBP/USD pair is under pressure as the US Dollar (USD) trades firmly amid expectations that the Federal Reserve (Fed) will pause its monetary-easing campaign in the monetary policy meeting later this month.

At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto gains near its six-week high of 99.50 posted on Thursday.

Traders have almost priced in that the Fed will hold interest rates steady in the current range of 3.50%-3.75% in the January policy meeting, according to the CME FedWatch tool.

The speculation for the Fed holding interest rates steady is fuelled by the United States (US) price pressures remaining sticky. On Thursday, Kansas City Fed Bank President Jeffrey Schmid also said that the monetary policy needs to be “modestly restrictive” as “inflation is too hot”.

Meanwhile, the Pound Sterling is expected to stay on the sidelines as investors shift focus to the United Kingdom (UK) employment and Consumer Price Index (CPI) data, which will be released next week. Investors will pay close attention to UK data to get fresh cues on the Bank of England’s (BoE) monetary policy outlook.

GBP/USD technical analysis

In the daily chart, GBP/USD trades at 1.3384. Price sits below the 20-day Exponential Moving Average (EMA) at 1.3428, and the later has started to turn lower, capping rebounds.

The 14-day Relative Strength Index (RSI) at 46 (neutral) remains below its midline, affirming soft momentum. Measured from the 1.3793 high to the 1.3009 low, the 50% retracement at 1.3401 acts as nearby resistance, and a close above it could ease bearish pressure.

While the pair holds beneath the 20-EMA, the near-term bias leans lower, and rallies tend to fade under overhead barriers. If buyers regain traction with a daily close above the average, upside extension would face the 61.8% retracement at 1.3494. Failure to clear these hurdles would keep price action contained beneath resistance, preserving a consolidative tone.

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