The GBP\/USD pair reached around 1.3480 in early Friday\u2019s Asian session. Markets anticipate potential interest-rate cuts from the US Federal Reserve, which could weaken the USD.<\/p>\n
The US Dollar saw its steepest annual drop in eight years in 2025. A 15% likelihood of a rate cut by the Fed in January is noted, painting a contrasting US rate scenario from the UK’s approach.<\/p>\n
US President Trump suggests a preference for a dovish successor to Fed Chair Powell, intending to keep interest rates low. This adds to concerns about the Fed’s independence in policy-making.<\/p>\n
The Bank of England’s gradual approach has lowered rates to 3.75%, their lowest in three years. Governor Andrew Bailey mentioned the likelihood of further reductions is uncertain for subsequent meetings.<\/p>\n
Pound Sterling, the UK’s currency, is traded globally and issued by the Bank of England. It ranks as the fourth most traded currency, with daily transactions averaging $630 billion in 2022.<\/p>\n
Economic performance reports affecting GDP, PMIs, and employment can impact the Pound. Positive data strengthens GBP, while weak data might lead to a decline.<\/p>\n
Trade Balance figures, measuring export-import discrepancies, influence the Pound’s stability. A positive balance boosts currency demand, enhancing the Pound’s value.<\/p>\n
With GBP\/USD firming above 1.3450, we see the primary driver as the anticipated weakness in the US Dollar. The recent non-farm payrolls report for December 2025, which added only 95,000 jobs against expectations of 150,000, reinforces the market’s view that the Federal Reserve must cut rates soon. This puts downward pressure on the dollar, making the pound look more attractive in comparison.<\/p>\n
For traders, this suggests positioning for further upside in GBP\/USD in the near term. We believe buying February or March 2026 call options is a viable strategy to capitalize on this momentum while managing downside risk. Strike prices around the 1.3550 and 1.3600 levels appear attractive, given the current trend.<\/p>\n
The Bank of England’s more measured approach to rate cuts provides a solid floor for the pound. Unlike the US, where the latest Core PCE inflation reading for November 2025 fell to 2.8%, UK inflation remains stickier at 3.1%, giving the BoE less urgency to cut aggressively. This policy divergence is the key theme we are trading on.<\/p>\n
The political uncertainty over the next Fed Chair is also a significant factor that could inject volatility into the market. This environment suggests that simply going long via futures might carry extra risk, making options-based strategies like bull call spreads potentially more suitable. These structures can help offset the rising cost of options due to higher implied volatility.<\/p>\n
Looking at the historical context, the dollar’s sharp decline in 2025 was its worst since 2017, marking a significant shift in the trend. In past cycles where the Fed has pivoted this aggressively towards easing, the dollar has often remained weak for several quarters. We see the current setup as the beginning of a similar pattern for 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 rises to 1.3480 amid Fed rate cut speculation; contrasting UK, US monetary policies influence markets.<\/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-38079","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\/38079","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=38079"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38079\/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=38079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}