The British Pound has weakened against the US Dollar after mixed economic reports from the US. Currently, GBP/USD is around 1.3478, down from its recent high of about 1.3518 on October 1. Earlier, the Pound had almost reached a 12-week peak against the Dollar during European trading sessions. This increase was partly due to expectations of potential rate cuts by the Federal Reserve in 2026.

GBP/USD Momentum

The GBP/USD pair maintained its positive trend for a second day, hitting its highest point since early October near 1.3500. This rise was aided by a generally weaker US Dollar and a favorable technical setup. US economic data showed growth at an annualized rate of 4.3% in Q3, surpassing the expected 3.3%. This led to a slight rebound in the US Dollar, causing GBP/USD to settle just below 1.3500 by the day’s end. Meanwhile, gold prices peaked at $4,497 but pulled back slightly after the strong US GDP data. In the cryptocurrency market, Bitcoin remains above the $87,000 support level, while Ethereum and Ripple face ongoing selling pressure. The Pound Sterling is testing the 1.3500 level against the Dollar, a mark not seen since early October. This momentum is mainly driven by expectations that the Federal Reserve will cut interest rates at least twice in 2026. However, the surprising 4.3% annualized growth in US GDP for the third quarter raises some concerns about this outlook.

Year-End Market Dynamics

The anticipation for Fed rate cuts is supported by inflation data that has significantly cooled over the past year. For instance, the Core PCE index, the Fed’s preferred measure, dropped to 3.2% in late 2023, contributing to the current trend of disinflation. Conversely, the Bank of England may experience tougher price pressures, which could create a policy gap favoring Sterling. As we approach the last week of the year, trading activity is expected to drop due to the holidays. This reduced liquidity can lead to exaggerated price movements, making the market susceptible to sudden changes based on new developments. Traders should handle positions cautiously, as even minor news could have a significant effect. Given the strong upward trend and the potential for a reversal due to robust US data, utilizing options could be a smart strategy. Buying call options on GBP/USD allows traders to benefit from any further rise above 1.3500 while capping potential risks. This approach is especially useful in today’s low-liquidity environment, where abrupt reversals are likely. Create your live VT Markets account and start trading now.

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