GBP\/USD has risen to around 1.3510 during Asian trading hours on Monday, spurred by the US Dollar’s difficulties. This movement coincides with anticipations of two more rate cuts by the Federal Reserve (Fed) in 2026.<\/p>\n
Attention is drawn towards the Federal Open Market Committee (FOMC) December Meeting Minutes, set to be released on Tuesday, providing insights into the Fed’s 2026 policy projections. The US central bank reduced the federal funds rate by 25 basis points (bps) at its December meeting, adjusting the target range to 3.50%\u20133.75%.<\/p>\n
The CME FedWatch tool currently indicates an 81.7% chance of rates being maintained at the Fed\u2019s January meeting, an increase from 77.9% the previous week. Meanwhile, the possibility of a 25-basis-point rate cut has decreased to 18.3% from 22.1%.<\/p>\n
Recent US labour market data presented mixed outcomes, with Initial Jobless Claims falling to 214K, surpassing the 223K forecast. Conversely, Continuing Jobless Claims increased to 1.923 million, while the four-week average of Initial Claims slightly declined to 216.75K.<\/p>\n
The Bank of England (BoE) reduced its policy rate by 25 bps to 3.75%, amid ongoing inflation concerns. Inflation dropped to 3.2% in November, but remained above the BoE’s 2% target, with UK GDP growing by 0.1% in Q3.<\/p>\n
Given the current situation on December 29, 2025, the primary focus for us is the diverging outlook between the US Federal Reserve and the Bank of England. The market is pricing in more aggressive Fed rate cuts for 2026, which is weighing on the US Dollar and pushing GBP\/USD higher. We should position for continued, albeit potentially volatile, upside in the pair.<\/p>\n
The Fed’s dovish stance is supported by cooling inflation and a softening, yet not collapsing, labor market. With US Core PCE inflation, the Fed’s preferred gauge, having fallen to 3.1% in November 2025, the 75 basis points of cuts delivered this year appear justified. The upcoming FOMC minutes are critical, as they will reveal how deep the consensus runs for further easing in 2026.<\/p>\n
Conversely, the Bank of England is in a tougher spot, making Sterling the more attractive currency for now. The close 5-4 vote for their rate cut earlier this month highlights significant concern over UK inflation, which at 3.2% remains stubbornly above target amid flat economic growth. This internal division suggests the BoE’s path to further cuts will be much slower and more cautious than the Fed’s.<\/p>\n
For derivative traders, this points toward buying GBP\/USD call options, perhaps targeting strikes around the 1.3650 level for the coming weeks. This strategy allows us to capture potential upside while defining our maximum risk. The premium paid is the most we can lose if the dollar unexpectedly strengthens.<\/p>\n
We should also consider that key data releases, like the FOMC minutes tomorrow, could increase short-term volatility. The mixed signals from recent US jobless claims data show the economic picture is not perfectly clear. Therefore, for those less certain of direction, buying a short-dated straddle could be a viable strategy to profit from a large price move in either direction.<\/p>\n
Looking back, we can see parallels to the 2010-2012 period, where currencies backed by even slightly less dovish central banks tended to outperform. The current dynamic, with the BoE constrained by inflation while the Fed has more room to cut, fits this historical pattern. This reinforces the view that the path of least resistance for GBP\/USD is likely higher moving into early 2026.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD climbs amid Fed rate cut expectations and mixed US jobs data; markets await FOMC minutes.<\/p>\n","protected":false},"author":62,"featured_media":17035,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/37767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=37767"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/37767\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/17035"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=37767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=37767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=37767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}