The Bank of England (BoE) has cut its interest rates, a decision that was closely debated among its members. This move suggests we are close to the end of the rate-cutting phase, with another decrease likely in early 2026. After the BoE’s surprising hawkish tone, the British Pound gained some strength. However, the market remains split on whether more cuts will happen by February or March. With the US Dollar weakening, the British Pound is expected to improve in the market.

Cryptocurrency And Precious Metals

In the world of cryptocurrency, Bitcoin is steady at around $87,000 thanks to an increase in ETF inflows. Ripple is holding at $1.82 amid cautious feelings in the overall market. Ethereum is maintaining its position at $2,800, though slight outflows are hindering its recovery. Gold is hovering around $4,330 but isn’t attracting much speculative interest despite recent central bank announcements and US inflation updates. The US Consumer Price Index (CPI) rose by 2.7% year-on-year in November, matching the Federal Reserve’s targets and affecting currency and precious metal markets. Meanwhile, the EUR/USD pair is nearing the 1.1700 level due to steady interest rates and updated forecasts from the European Central Bank (ECB). On December 18, 2025, the Bank of England’s rate cut came from a split vote. This indicates we are nearing the end of monetary easing, with one more cut expected in the first quarter of 2026. This is a relatively hawkish position, contrasting with the softer inflation data from the US that could lead to more significant cuts from the Federal Reserve.

Economic Data And Market Reactions

The BoE’s cautious approach is understandable given last month’s data. According to the Office for National Statistics, the headline CPI in November was 2.1%, only slightly above the BoE’s 2% target. The economy showed only a small 0.1% growth in the third quarter, forcing the BoE to carefully balance growth stimulation and inflation control. The split vote indicates that future policy decisions will depend heavily on data, meaning we should prepare for increased volatility in the pound. A similar spike in volatility occurred in 2022 when central banks began raising rates aggressively. Strategies, like buying call spreads, could help manage risk while positioning for further strength in the GBP/USD. We believe speculative positions have been leaning toward a bearish outlook on the pound, anticipating a more dovish BoE. Today’s “hawkish cut” could lead to a short squeeze, driving GBP/USD higher toward the 1.34 level it reached earlier. This strength could also benefit from trading against the euro, particularly because the ECB’s direction remains less certain. Create your live VT Markets account and start trading now.

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