GBP/USD declined near 1.2260 as the dollar was buoyed by robust economic figures and the Federal Reserve's cautious policy stance. ADP Employment Change eased to 122K from November's 146K, well below the expected 140K, marking its slowest pace since mid-2021. The latest Fed Meeting Minutes cited concerns about the incoming President Trump's tariff plans and the potential impact of immigration and trade policies on the next interest rate decision.

On the sterling front, the Bank of England's gradual approach to policy easing amid high inflation due to stubborn wage growth undermines the pound. Moreover, a substantial rise in borrowing costs for the UK government may heighten the nation's debt burden, possibly compelling Chancellor Rachel Reeves to implement tax hikes to adhere to fiscal regulations. In the absence of any relevant UK economic data, broader market sentiment around the US Nonfarm Payrolls (NFP) data for December and influential FOMC members' speeches will determine the GBP/USD's trajectory.

EUR/GBP Rallies on Softer Pound

EUR/GBP edges higher near 0.8385 as the market anticipates an aggressive European Central Bank (ECB) stance in 2025 despite rising inflation in the Eurozone. German industrial output rose to 1.5% MoM in November, a positive jump from a 1.0% drop in October. Annual Retail Sales increased by 2.5% in November from 1.0% in October, beating the expected 1.9%, while European Harmonized Index of Consumer Prices (HICP) inflation rose slightly to 2.4% YoY from 2.2%.

On the sterling front, the latest UK Retail Sales figures saw a notable 3.2% increase year-on-year in December 2024, marking their highest level since March 2024, supporting the pound. However, growing concerns about how climbing UK bond yields might affect public finances could cap potential gains for sterling. The NIESR GDP Estimate and ECB Economic Bulletin could influence the EUR/GBP movements in upcoming sessions.

AUD/USD Sinks Despite Upbeat Trade Report

AUD/USD edges lower near 0.6193 as the Australian dollar faces challenges despite stronger-than-expected Australian trade data. Australia's trade surplus rose to 7,079 million in November, above the expected 5,750 million and the revised 5,670 million from October. Exports grew by 4.8% MoM, up from 3.5% in October. Imports increased by 1.7% MoM, compared to 0% in the previous month. Retail Sales saw a 0.8% MoM rise in November, surpassing October's 0.5% growth but missing the 1.0% expected. China's Consumer Price Index (CPI) also signals growing deflationary risks, pressuring the Aussie Annual inflation rose by 0.1% in December, slightly lower than November's 0.2% increase, in line with market expectations.

On a month-on-month (MoM) basis, CPI inflation remained flat at 0% in December, matching forecasts after a 0.6% decline in November. On the contrary, concerns about tariff plans from the incoming Trump administration and the hawkish minutes of the Federal Open Market Committee (FOMC) meeting support the greenback. As Australian data is scarce, the market sentiment around the latest US Nonfarm Payrolls report will impact AUD/USD movements.

AUD/JPY Struggles Due to Dovish Outlook Around RBA

AUD/JPY loses momentum near 97.88 as scepticism about the upcoming Bank of Japan's interest rate decisions acts as a headwind for the yen, dampening the impact of strong wage growth data. Labor Cash Earnings rose 3.0% YoY in November, up from the revised 2.2% in October and surpassing expectations of 2.7%. However, Real Wages, adjusted for inflation, fell 0.3% YoY, continuing a four-month decline following a 0.4% drop in October. On the Aussies side, recent headline inflation figures printed at 2.1%, aligning with the RBA's 2-3% target range, potentially paving the way for rate cuts in the months ahead.

On the economic front, Australia's Retail Sales rose by 0.8% MoM in November, up from 0.5% in October, but fell short of the 1.0% expected. Australia's trade surplus surged to 7,079 million, exceeding forecasts and the previous 5,670 million. Exports grew by 4.8% MoM, while imports rose by 1.7%. China's CPI data, indicating deflationary risks and a risk-averse market mood, have outweighed the positive impact of stronger-than-expected Australian trade data. In the upcoming session, the broader market sentiment will influence the AUD/JPY movements.

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