GBP/USD falls to new lows at the start of the new trading year | 03 January 2025

Event to watch out for today:

17:00 EET. USD - ISM Manufacturing Index

GBPUSD:

GBP/USD deteriorated on Thursday, falling below 1.2400 for the first time in nearly ten months. Market volumes remain low after New Year's Eve, but incoming orders tend to be risk-off.

UK economic data remains uninformative until the end of the first trading week of 2025, leaving traders to face fresh US Purchasing Managers' Index (PMI) data scheduled for Friday. Data on money supply and mortgage approvals in the UK are also due out early Friday, but these low-key indicators are unlikely to impact markets.

The ISM US Manufacturing PMI for December is expected to remain unchanged at 48.4, the same as the preliminary reading. Despite a slight increase in the index for the month, US businesses remain cautious about activity in the first quarter of 2025 as domestic demand cools.

The key for traders will be the rate differential in the first half of 2025. The Federal Reserve (Fed) will cut rates much less frequently this year than previously expected. The Fed itself expects only two 25bp rate cuts through 2025, as noted in the US central bank's December Summary of Economic Projections (SEP) report.

Trading recommendation: Watch the level of 1.2400, when fixing above it consider Buy positions, when rebounding consider Sell positions.

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