GBP/USD Rises to Multi-Month High After UK Data

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: January 26, 2026

Key Moments

GBP/USD trades near 1.3660, its strongest level since September 17, 2025, in early European dealings on Monday.
UK December Retail Sales and Composite PMI both beat expectations, reinforcing the Pound and prompting talk of delayed BoE rate cuts.
Markets look ahead to the US November Durable Goods Orders on Monday and the Federal Reserve rate decision on Wednesday.

GBP/USD Holds Firm on UK Retail and PMI Upside Surprises

The GBP/USD pair is advancing in early European trade on Monday, hovering around 1.3660, its highest reading since September 17, 2025. The Pound Sterling is strengthening against the US Dollar as investors respond to stronger-than-forecast UK Retail Sales and Purchasing Managers Index (PMI) data.

Market participants are also preparing for the release of the US November Durable Goods Orders report later on Monday, which could influence the next leg of the move in the pair.

UK Retail Sales and PMI Beat Forecasts

According to figures from the Office for National Statistics (ONS) released on Friday, UK Retail Sales rose 0.4% month-over-month in December, reversing a 0.1% decline in November. The December print outperformed consensus expectations, which had pointed to a 0.1% decrease.

Core Retail Sales, which exclude automotive fuel, increased 0.3% month-over-month in December. This followed a previously reported 0.4% decline in November, revised from -0.2%, and contrasted with market expectations for a 0.2% drop.

In addition, the S&P Global UK Composite PMI climbed to 53.9 in December, exceeding forecasts and marking a 21-month high.

Indicator	Period	Actual	Previous	Consensus
UK Retail Sales (MoM)	December	0.4%	-0.1%	-0.1%
UK Core Retail Sales (MoM)	December	0.3%	-0.4% (revised from -0.2%)	-0.2%
S&P Global UK Composite PMI	December	53.9	–	Above expectations

Implications for Bank of England Policy and Sterling

The combination of firmer retail activity and a higher Composite PMI has led some analysts to anticipate that the Bank of England could postpone additional interest rate cuts. Such a scenario would be supportive for the Pound against the US Dollar.

The UK central bank is expected to keep interest rates unchanged at its upcoming policy meeting in February. According to Reuters, markets are fully pricing in a quarter-point rate cut by June.

Fed Decision in Focus as USD Awaits New Catalysts

Attention is now turning to the US Federal Reserve, which is scheduled to announce its latest interest rate decision on Wednesday. Market expectations are that the Fed will leave its target range steady at 3.50% to 3.75%.

Traders will scrutinize Fed Chair Jerome Powell’s comments following the meeting for guidance on the policy outlook. Any unexpectedly hawkish tone from Fed officials could lend support to the US Dollar and potentially cap further gains in GBP/USD in the near term.

Background: Pound Sterling and Policy Drivers

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.