During Wednesday's Asian trading session, the British pound maintained its upward momentum against the US dollar, trading near 1.3430 and extending its positive run for a third consecutive day.
Recent UK employment data has provided support for the pound: the number of employed people increased by 82K over three months, reversing a previous decline of 17K; average earnings excluding bonuses rose 4.5% year-on-year, while average earnings including bonuses increased by 4.7% year-on-year.
Although the unemployment rate held steady at 5.1%, slightly above market expectations, the overall improvement in employment continued to bolster market confidence in buying the pound. Markets will now focus on the UK's December CPI, PPI, and retail price index data, which could provide fresh impetus for exchange rate volatility.
For the US dollar, pressure has mounted due to ongoing tensions in US-Europe relations surrounding the Greenland dispute. US President Trump reiterated that there is "no turning back" from the plan to acquire Greenland, threatened new 10% tariffs on eight European nations, and also menaced a 200% tariff targeting French President Macron for not joining his "peace committee."
These policy moves have intensified market concerns about a global economic slowdown, diminishing the dollar's appeal as a safe-haven currency. Furthermore, the European Parliament plans to suspend approval of the US-EU trade agreement reached in July and will formally announce its decision this Wednesday in Strasbourg, France.
Should US-Europe relations deteriorate further, it could fuel expectations of continued dollar weakness while supporting the GBP/USD pair's recent upward trend.
From a technical perspective, GBP/USD has found support near its short-term moving averages, with the bullish trend remaining stable. If UK economic data continues to improve, the pound has room for further gains, although political and trade uncertainties between the US and Europe may still lead to increased short-term volatility.
"Improved employment data provides short-term support for the pound, but the dollar is under pressure from US-Europe tensions and tariff threats, which is allowing GBP/USD to extend its gains," commented a market analyst.
Editor's View: The recent performance of GBP/USD reflects the combined influence of fundamental factors and geopolitical risks. Improving UK employment has provided solid support for the pound, while the dollar's weakness due to US-Europe tensions has created near-term upside potential.
However, markets must remain vigilant regarding upcoming UK CPI, PPI, and retail price data, as well as the potential impact of developments in US-Europe relations on the dollar.
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