Sterling Trades Broadly Stable

Sterling Holds Firm Despite Inflation Risks

Pound Sterling holds near recent highs amid hopes of gradual BoE easing

The Pound Sterling (GBP) trades broadly stable against major currencies at the start of the final week of 2025, holding firm around 1.3500 against the United States Dollar (USD).

This stability reflects investor expectations that the Bank of England (BoE) will pursue a gradual and moderate monetary easing cycle in 2026.

Elevated inflation limits aggressive rate cuts

Despite recent signs of cooling, inflation in the United Kingdom remains well above the BoE’s 2% target.

Annual inflation slowed to 3.2% in November, down from a peak of 3.8% during the July–September period.

In its latest policy statement, the BoE reiterated that monetary policy will remain on a downward path, but gradually.

Year-end liquidity thins; FOMC minutes awaited

Markets are expected to remain range-bound in the coming days due to thin liquidity ahead of the New Year holiday on January 1.

Traders now await the release of the Federal Open Market Committee (FOMC) minutes on Tuesday, which could offer fresh insights into the United States monetary policy outlook.

Dollar pressured by easing expectations

The United States Dollar Index trades near 98.00, close to its 12-week low of 97.75.

Investors expect the Federal Reserve to cut interest rates more aggressively in 2026 than it did in 2025.

According to the CME FedWatch tool, there is a 73.3% probability of at least a 50 basis point rate cut next year.

This contrasts with the Fed’s latest dot plot, which projects the Federal Funds Rate at 3.4% by the end of 2026 — implying only one rate cut from the current range of 3.50%–3.75%.

President of the United States fuels dovish speculation

Last week, the President of the United States stated that he wants the next Federal Reserve Chair to lower interest rates even if markets are performing well.

This comment has intensified speculation that the incoming Fed leadership may adopt a more dovish stance, adding further pressure on the USD.

Technical Analysis: GBP/USD supported above 20-day EMA

On the daily chart, GBP/USD trades at 1.3488, holding above the 20-day Exponential Moving Average (EMA) at 1.3398 — a sign of bullish momentum.

The steepening slope of the EMA reflects steady buying pressure.

The 14-day Relative Strength Index (RSI) stands at 66, indicating bullish conditions without overbought signals.

The 61.8% Fibonacci retracement of the 1.3794–1.3011 decline at 1.3495 acts as resistance.

A break above this level could open the path toward the 78.6% retracement at 1.3626.

Summary: Pound steady amid BoE caution and USD pressure

The Pound Sterling remains stable against the United States Dollar, with markets awaiting key policy signals.

BoE’s cautious stance, driven by elevated inflation, continues to support the GBP.

Meanwhile, the USD faces pressure from expectations of faster rate cuts and political signals favoring dovish leadership at the Fed.

Overall, GBP/USD is likely to remain balanced but sensitive to upcoming data in the short term.