Published: 4 December 2025,05:42
Daily Market Analysis New
*Softer U.S. data has boosted expectations of a Fed rate cut, weakening the USD, while the BoE’s comparatively hawkish stance keeps Sterling supported.
*Stronger-than-expected PMI readings and easing stagflation fears have reinforced confidence in the UK’s economic backdrop.
*Markets have absorbed the Autumn Budget with relief, removing a key political overhang and supporting GBP’s continued outperformance.
The Pound Sterling has consolidated its position as one of the strongest performers in the G10 currency space in recent sessions, buoyed by a combination of supportive external dynamics and improving domestic fundamentals.
A primary catalyst has been the shifting monetary policy divergence between the Bank of England and the Federal Reserve. The recent soft U.S. ADP employment data has significantly bolstered market expectations for a Fed rate cut next week, applying broad downward pressure on the U.S. dollar. In contrast, the Bank of England maintains a relatively hawkish stance as it continues to grapple with above-target inflation, making Sterling an attractive destination for yield-seeking capital.
Domestically, concerns over a potential UK “stagflation” scenario have receded. Recent economic indicators, including better-than-expected PMI readings, suggest the economy is demonstrating resilience. This has improved confidence in the UK’s economic trajectory and the currency’s fundamental backing.
Furthermore, a key political overhang has been removed. The market has now largely absorbed the details of the UK Autumn Budget, with initial fears of aggressive tax hikes giving way to relief that the announced measures were less disruptive than some worst-case scenarios. This has alleviated a major source of uncertainty and selling pressure on the Pound.
The convergence of a softening dollar, a steadfast BoE, resilient UK data, and reduced fiscal uncertainty has created a potent supportive environment for Sterling, positioning it for continued relative strength in the near term.
Technical Analysis
The EUR/GBP pair has confirmed a decisive shift to a bearish near-term trajectory. After reaching a recent peak at the 0.8865 level, the pair subsequently established a pattern of consecutive lower highs and lower lows, signaling an exhaustion of prior bullish momentum and the initiation of a downtrend.
This bearish structure was reinforced by a decisive breakdown below the crucial liquidity and support zone around 0.8755. The breach of this level signifies a meaningful deterioration in the pair’s technical posture, invalidating previous consolidation and opening the path for further potential downside.
Momentum indicators corroborate the negative outlook. The Relative Strength Index (RSI) has declined toward oversold territory, reflecting persistent and strengthening selling pressure. Concurrently, the Moving Average Convergence Divergence (MACD) has completed a bearish crossover below its zero line, providing clear confirmation of the shift in underlying momentum.
The convergence of the bearish price pattern, the breakdown of key support, and aligned negative momentum readings presents a compelling bearish case. The 0.8755 level now becomes immediate resistance, with any technical rebounds likely to face selling pressure in this region. The pair’s trajectory is now contingent on its ability to hold below this threshold, with a sustained break potentially targeting the next significant support zone.
Resistance Levels: 0.8840, 0.8955
Support Levels: 0.8610, 0.8515
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