GBP/USD rises toward 1.2550 as US Dollar continues to correct downwards

• GBP/USD strengthens as the US Dollar Index continues to face pressure for the third consecutive session.
• The US Dollar could receive some support after President-elect Trump stated that his tariff policy will not be scaled back.
• BRC Like-For-Like Retail Sales in the UK increased by 3.1% in December, swinging from the previous 3.4% decline.

GBP/USD continues to rise for the third consecutive day, trading near 1.2530 during Tuesday's Asian session. The pair's upward momentum is driven by a subdued US Dollar (USD). Later in the day, the US ISM Services Purchasing Managers Index (PMI) is set to be released. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting.

The US Dollar Index (DXY), which tracks the USD's performance against six major currencies, remains under pressure for the third straight session, trading near 108.30 at the time of writing. However, the Greenback may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back.

Trump refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. Traders are expected to closely watch developments related to Trump's tariff strategy.

The Pound Sterling (GBP) showed little movement following the release of the UK Retail Sales figures on Tuesday. The British Retail Consortium (BRC) Like-For-Like Retail Sales saw a notable 3.1% increase in December 2024, a sharp rebound from the previous month's 3.4% decline. This surge exceeded market expectations, which had forecasted a 0.2% drop, and was largely driven by robust Black Friday spending. It marked the largest monthly increase since March 2024.

Despite the December uptick, the BRC reported that overall retail performance in the fourth quarter of 2024 remained lackluster, with year-on-year sales growth of just 0.4%. For the entire year, total retail sales increased by 0.7%, while like-for-like sales rose by a modest 0.5%.

Helen Dickinson, Chief Executive of the BRC, remarked: "After a challenging year of weak consumer confidence and tough economic conditions, the crucial 'golden quarter' failed to deliver the strong finish that retailers had hoped for in 2024."