The British Pound (GBP) has weakened against the US Dollar (USD) on a holiday-affected Wednesday. Currently, GBP/USD is trading around 1.3500, down slightly from an intraday peak of 1.3534, which was the highest since mid-September. During the European session, the Pound Sterling reached a three-month high of 1.3535 against the USD. Although the US Q3 GDP data showed unexpected growth, it did not reduce the market’s expectations of a softer Federal Reserve (Fed) approach in 2026.

Pound Sterling Trades Strongly

The GBP/USD pair is trading positively around 1.3510 in early European trading. Its strength comes from expectations of gradual monetary easing by the Bank of England (BoE) in 2026, pushing it above the 1.3500 mark. FXStreet provides general market information and reminds investors that financial investments carry risks. It encourages thorough research and understanding of financial risks before making any investment choices. The Pound is holding steady against the Dollar, hovering near the 1.3500 level. Trading is quiet due to the Christmas Eve holiday, but the trend is influenced by the belief that the central banks will take different paths. The market increasingly expects the Bank of England to cut interest rates slower in 2026 than the US Federal Reserve. This view on the BoE is backed by November 2025 inflation data, which showed UK CPI remaining high at 3.9%, above the bank’s target. As a result, the BoE kept its policy rate steady at 5.25% in December, indicating any easing next year will be cautious. This approach should continue to support the Pound Sterling.

Federal Reserve And Market Trends

In the US, the Federal Reserve’s cautious stance is bolstered by decreasing price pressures. The latest core PCE inflation data for November 2025 showed an annualized rate of 3.2%. This gives the Fed more room to start cutting rates. We expect this difference in policy to drive currency markets in the first quarter of 2026. For derivatives traders, the low implied volatility during this holiday season provides an opportunity for positioning ahead of next year. We suggest purchasing GBP/USD call options that expire in late March or April 2026 as a smart way to bet on potential upward movement when liquidity returns. This situation reminds us of early 2020, when differences in central bank policies created lasting trade trends. In the next few days, traders should be careful of unpredictable price shifts due to low trading volume. Sudden movements are typical between Christmas and New Year’s and may not accurately reflect market sentiment. Any dips toward the 1.3400 mark could be a good opportunity to build positions for the new year. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now