The GBP/USD pair gained ground on Thursday, trading around 1.2590 during the Asian session after declining more than 1% the previous day following the Federal Reserve’s hawkish rate cut. The Pound Sterling (GBP) found upward momentum as market expectations grow that the Bank of England (BoE) will keep interest rates unchanged later today while continuing to address rising domestic inflation.
UK inflation data released on Wednesday showed the Consumer Price Index (CPI) increased by 2.6% year-over-year in November, up from 2.3% in October. Core CPI, which excludes volatile food and energy prices, rose 3.5% YoY in November, compared to 3.3% the previous month. Meanwhile, annual services inflation held steady at 5%, slightly below the forecast of 5.1% but above the BoE’s estimate of 4.9%.
The initial drop in GBP/USD came as the US Dollar (USD) strengthened following the Federal Reserve’s decision to implement a 25 basis point rate cut at its December meeting, lowering its benchmark rate to a range of 4.25%-4.50%, the lowest in two years. The Fed‘s Summary of Economic Projections (dot plot) indicated only two rate cuts in 2025, down from the four previously forecast in September. Fed Chair Jerome Powell also emphasized caution in further rate cuts, as inflation remains persistently above the central bank’s 2% target. Traders will be closely watching US economic data, including weekly Initial Jobless Claims, Existing Home Sales, and the final reading of Q3 GDP, later Thursday.
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