- The Pound Sterling slides against major peers after UK inflation data for November came in as expected.
- The inflation data cements prospects that the BoE will keep interest rates steady at 4.75% on Thursday.
- The Fed is expected to cut interest rates by 25 basis points to 4.25%-4.50%.
The Pound Sterling (GBP) falls against its major peers on Wednesday after the release of the United Kingdom (UK) Consumer Price Index (CPI) data for November, which showed that price pressures rose in line with estimates. The CPI report highlighted that annual headline inflation accelerated to 2.6% YoY, as expected, from 2.3% in October.
Compared with the previous month, headline inflation rose by 0.1%, also meeting expectations and easing from the 0.6% growth in October.
The core CPI – which excludes volatile items such as food, energy, oil, and tobacco – grew by 3.5%, slower than estimates of 3.6% but faster than the former reading of 3.3%. Services inflation, a closely watched indicator by Bank of England (BoE) officials, rose steadily by 5%.
The rise in inflation cements expectations that the Bank of England (BoE) will leave interest rates unchanged at 4.75% in the policy meeting on Thursday, with an 8-1 vote split. BoE Monetary Policy Committee (MPC) member Swati Dhingra is expected to vote for cutting interest rates by 25 basis points (bps) to 4.5%.
Investors will closely watch BoE Governor Andrew Bailey’s press conference to gauge whether the central bank will accelerate its policy easing in 2025.
Going forward, investors will also focus on the UK November retail Sales data, which will be released on Friday.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | 0.19% | 0.08% | 0.06% | 0.33% | 0.35% | 0.13% | |
| EUR | 0.05% | 0.24% | 0.13% | 0.11% | 0.38% | 0.39% | 0.18% | |
| GBP | -0.19% | -0.24% | -0.12% | -0.12% | 0.14% | 0.16% | -0.06% | |
| JPY | -0.08% | -0.13% | 0.12% | -0.03% | 0.24% | 0.24% | 0.04% | |
| CAD | -0.06% | -0.11% | 0.12% | 0.03% | 0.27% | 0.28% | 0.07% | |
| AUD | -0.33% | -0.38% | -0.14% | -0.24% | -0.27% | 0.01% | -0.20% | |
| NZD | -0.35% | -0.39% | -0.16% | -0.24% | -0.28% | -0.01% | -0.21% | |
| CHF | -0.13% | -0.18% | 0.06% | -0.04% | -0.07% | 0.20% | 0.21% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily digest market movers: Pound Sterling consolidates ahead of Fed policy
- The Pound Sterling remains broadly sideways against the US Dollar (USD) around 1.2700 in Wednesday’s London session. The US Dollar consolidates ahead of the Federal Reserve’s (Fed) monetary policy announcement at 19:00 GMT. According to the CME FedWatch tool, traders have priced in a 25-bps interest-rate reduction, which would be the third consecutive interest rate cut.
- With market participants expecting a cut, investors will pay close attention to the Federal Open Market Committee (FOMC) Economic Projections and the dot plot, which shows where policymakers see the federa funds rate heading in the medium and longer term.
- A majority of economists expect a less dovish Fed for 2025, according to a recent Bloomberg survey. Economists see the Fed reducing interest rates three times next year as inflation remains above the Fed's target. The survey also indicated that economists have become more worried about upside risks to inflation with incoming President-elect Donald Trump's policies, which include mass deportations, higher import tariffs, and tax cuts.
Technical Analysis: Pound Sterling holds upward-sloping trendline near 1.2600
The Pound Sterling wobbles near the 20-day Exponential Moving Average (EMA) near 1.2815 against the US Dollar (USD). The GBP/USD pair rebounded near the upward-sloping trendline around 1.2600, which is plotted from the October 2023 low at around 1.2035.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.
Looking down, the pair is expected to find a cushion near the psychological support of 1.2500. On the upside, the 200-day EMA near 1.2710 will act as key resistance.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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