The GBP/USD pair remains steady after a turbulent session, trading between 1.3380 and 1.3385, with a slight daily rise of 0.05%. Traders are looking at mixed signals following updates from the Bank of England and recent US inflation data. The British Pound has gained from a recent rate cut by the Bank of England, which lowered the interest rate by 25 basis points to 3.75%. The decision was nearly split, showing different opinions among committee members in light of surprising inflation figures earlier this week, which influences future expectations regarding aggressive easing.

Inflation Data Influence

In Thursday’s North American session, GBP/USD rose to 1.3410, up 0.28%, after previously dropping to 1.3340. This movement followed the US Consumer Price Index, which increased by 2.7% year-on-year in November, down from 3% in September. This data was affected by challenges in collection due to a government shutdown. The core US inflation rate fell to 2.6%, which was better than expected. However, the extended government shutdown hindered the usual data collection for the report, affecting the overall inflation analysis. Yesterday, the Bank of England announced its rate cut to 3.75% in a very close 5-4 vote. This tight decision indicates significant disagreement among members, suggesting that aggressive cuts early in 2026 are uncertain. This hesitation helps support the Pound against the Dollar. For the US side, the inflation data from yesterday showed a rate of 2.7%, continuing the slow disinflation trend we have observed since the pandemic peaks of 2022. However, it’s important to be cautious since this report may be influenced by the recent 43-day government shutdown, which affected data collection. The questionable nature of this data currently puts pressure on the US Dollar.

Potential Market Movements

Due to differences in policy, GBP/USD could rise towards the 1.3500 level in the upcoming weeks. Traders might consider using call options to benefit from this expected move, especially as implied volatility stabilizes after yesterday’s central bank announcements. The main risk lies in any US official downplaying the soft inflation report, which could lead to a rebound in the Dollar. We should also keep in mind that we are approaching the holiday season, when trading volumes typically drop significantly. Historically, during the thin holiday markets of late 2023 and 2024, these conditions can lead to exaggerated price swings on minimal news. Therefore, managing position sizes carefully is crucial to navigate any sudden price changes with low liquidity as we approach the end of the year. Create your live VT Markets account and start trading now.

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