The Pound Sterling reached a three-month high of 1.3535 against the US Dollar amidst expectations that the Federal Reserve will reduce interest rates in 2026. Despite a 4.3% annualised growth in the US GDP during the third quarter, these figures have not altered the anticipation of a dovish Federal Reserve. <\/p>\n
The US Dollar Index registered an 11-week low of 97.75, while the Bureau of Economic Analysis indicated a 4.3% growth, up from 3.8% in the previous quarter. The CME FedWatch tool showed a 70.6% likelihood of the Federal Reserve cutting rates by at least 50 basis points in 2026.<\/p>\n
The Bank of England recently cut interest rates to 3.75% by a 5:4 vote, keeping to a gradual easing policy. UK inflation decreased to 3.2% year-on-year in November, with speculation of more rate cuts in 2026. <\/p>\n
Technically, the GBP\/USD pair stood at 1.3513, maintaining a positive short-term trend. Technical indicators suggested some consolidation could occur if pressure on the pair eases, with resistance identified at key Fibonacci retracement levels. <\/p>\n
The BoE’s interest rate decisions, made at eight meetings annually, are pivotal for determining sentiment towards the Pound Sterling. A dovish outlook typically leads to a negative effect on the currency’s standing.<\/p>\n
We are seeing the Pound continue to strengthen against the US Dollar as we head into the holidays, reaching its highest point in three months. This is driven by the belief that the Federal Reserve will be more aggressive in cutting interest rates in 2026 compared to the Bank of England. With US core inflation we saw tracking at 3.5% in October 2025, markets are pricing in Fed cuts, even with strong headline GDP numbers.<\/p>\n
Despite the reported 4.3% US GDP growth for the third quarter of 2025, the underlying job market appears soft, supporting the case for Fed easing. For example, the November 2025 Non-Farm Payrolls report showed a gain of only 155,000 jobs, which points to a cooling labor market. This weakness makes traders hesitant to bet on US Dollar strength, suggesting that selling rallies in the DXY futures index could be a viable strategy in the coming weeks.<\/p>\n
In contrast, the Bank of England appears more cautious, having delivered a narrowly-voted 25 basis point cut just last week on December 18, 2025. UK inflation remains sticky at 3.2%, well above the 2% target, which limits how quickly the BoE can ease policy. This policy difference, or divergence, is a primary reason to consider bullish positions on the Pound, such as buying GBP\/USD call options that expire in early 2026.<\/p>\n
Looking at the charts, we should be cautious in the immediate short-term as the Relative Strength Index (RSI) is in overbought territory above 70. This suggests the Pound’s recent rally might be overextended and due for a pause, especially with thin holiday trading volumes. It might be prudent to wait for a dip towards the 1.3400 level to initiate new long positions or use option spreads to define risk against a sudden reversal.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Pound Sterling hits three-month high amid rate cut expectations; US Dollar softens despite strong GDP growth.<\/p>\n","protected":false},"author":62,"featured_media":17031,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37694","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-ca\/wp-json\/wp\/v2\/posts\/37694","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=37694"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/37694\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17031"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=37694"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=37694"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=37694"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}