Pound Sterling Falls Against Euro and Dollar on New Year’s Eve

– Written by


David Woodsmith

STORY LINK Pound Sterling Falls Against Euro and Dollar on New Year’s Eve

The Pound Sterling (GBP) edged lower against both the Euro (EUR) and US Dollar (USD) on New Year’s Eve (Wednesday) as currency investors adjusted positions ahead of the final hours of 2025, keeping trading subdued and cautious.

At the time of writing, The Pound to Dollar exchange rate (GBP/USD) was trading near $1.3436. Although the pair recovered from an earlier dip to $1.3426, it remained around 0.2% lower on the session.

The Pound to Euro exchange rate (GBP EUR) was seen quoted at 1.1461, marginally lower on the day.

The US Dollar (USD) strengthened in the final trading session of the year, extending gains from Tuesday as year-end positioning boosted demand for the currency.

The ‘Greenback’ has had a difficult year, with losses of close to 10% across 2025. That underperformance appears to have encouraged some late buying, as traders moved to take advantage of comparatively depressed levels.

Additional support for USD may have come from the Federal Reserve’s December meeting minutes, released on Tuesday evening. While the Fed delivered a rate cut at its last meeting, the minutes revealed a closely balanced debate rather than a decisive shift toward aggressive easing.

Policymakers signalled a preference to keep rates on hold for now, pending clearer evidence that inflation is resuming its downward path or that the labour market is weakening more sharply. This cautious tone helped underpin the Dollar in thin end-of-year trade.

The Pound (GBP) struggled to keep pace with the firmer US Dollar, slipping as risk appetite softened into the year-end close.

Although some global equity markets posted record highs earlier in the week, the upbeat momentum faded quickly, leaving the increasingly risk-sensitive Pound without strong support.

Sterling was also hampered by a lack of domestic catalysts. With the UK data calendar empty, there was little to inspire demand for the currency, leaving GBP on the back foot as trading wound down.

GBP/USD, GBP/EUR Near-Term Forecast: Final Manufacturing PMIs in the Spotlight

Looking ahead, markets reopen for the first full trading session of the new year on Friday, with the Pound to US Dollar exchange rate likely to take direction from the final manufacturing PMI releases in both the UK and the US.

Preliminary surveys suggested UK factory activity improved in December. If the final data confirms this pickup, the Pound could receive some short-term support, though gains may be limited given manufacturing’s relatively small role in the wider economy.

In the US, the final manufacturing PMI is expected to show cooling factory output. Such a reading could apply mild pressure to the US Dollar, particularly if it reinforces the narrative of slowing economic momentum.

Beyond the data, broader market sentiment will remain crucial. A positive start to the year could favour the risk-sensitive Pound, while a cautious or defensive mood would be more likely to support the safe-haven US Dollar.

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TAGS: Pound Dollar Forecasts