The GBP/USD pair remains under pressure around 1.2510 during Thursday’s Asian session, primarily driven by a stronger US Dollar (USD). This decline is fueled by expectations that the Federal Reserve will slow the pace of its easing cycle in the coming year, strengthening the Greenback against the Pound (GBP).
In its December meeting, the Federal Reserve reduced the Federal Funds Rate to a range of 4.25% to 4.5%, down from 4.5% to 4.75%. Fed Chair Jerome Powell underscored the need for caution in further rate cuts, citing persistent inflation. Powell noted that central bank officials foresee a higher inflation outlook and anticipate fewer rate cuts in 2025 than previously expected. The Fed has scaled back its forecast from four rate cuts to just two next year.
Meanwhile, the GBP faces downward pressure as the Bank of England (BoE) takes a more cautious stance. Governor Andrew Bailey emphasized that a “gradual” approach to interest rate cuts is still appropriate, resisting market expectations for more aggressive easing. Additionally, Bailey pointed to the uncertainty surrounding geopolitical risks and potential trade policies under the potential return of Donald Trump to the White House, which could further slow the already weakening UK economy, creating additional challenges for the GBP.
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