The British Pound has eased against the US Dollar following the release of mixed economic data from the US. GBP/USD is trading around 1.3478, down from its peak since October 1 at roughly 1.3518.
Earlier, the British Pound had revisited nearly a 12-week high against the Dollar during European trading hours. This was due in part to expectations of future rate cuts by the Federal Reserve in 2026.
Gbp Usd Momentum
The GBP/USD pair continued its positive momentum into a second day, reaching its highest since early October near the 1.3500 mark. This was supported by a generally weaker US Dollar and a favourable technical setup.
Economic data showed the US economy expanding at an annualised rate of 4.3% in Q3, surpassing the forecast of 3.3%. This caused a modest rebound for the US Dollar, affecting GBP/USD, which traded just below 1.3500 by the day’s end.
Simultaneously, gold prices reached $4,497 but retreated slightly following the strong US GDP figures. In the crypto market, Bitcoin remains above the $87,000 support amid ongoing selling pressure impacting Ethereum and Ripple as well.
We see the Pound Sterling testing the 1.3500 level against the Dollar, a high not seen since early October. This momentum is largely built on expectations that the Federal Reserve will cut interest rates at least twice in 2026. However, the stronger-than-expected 4.3% annualized US GDP growth for the third quarter introduces some doubt into this narrative.
Year End Market Dynamics
This expectation for Fed easing is fueled by inflation data that has cooled significantly over the past year. We remember how the Core PCE index, the Fed’s preferred gauge, fell to 3.2% back in late 2023, setting the stage for the current disinflationary trend. On the other hand, the Bank of England may face stickier price pressures, potentially creating a policy divergence that favors Sterling.
As we head into the final week of the year, trading volumes are expected to be thin due to the holidays. This low liquidity can exaggerate price movements, making the market vulnerable to sudden swings on any new headlines. For traders, this means any positions should be managed with caution, as seemingly small news can have an outsized impact.
Given the clear upward momentum but the risk of a snap-back from the strong US data, using options could be a prudent strategy. Buying call options on GBP/USD allows for participation in any further rally beyond 1.3500 while defining and limiting the maximum risk. This is particularly useful in the current low-liquidity environment where sudden reversals are a distinct possibility.
