The GBP/USD pair is losing momentum near 1.3485 during early European trading, driven by new demand for the US Dollar. The Bank of England (BoE) plans to continue its gradual policy easing, with a benchmark interest rate cut to 3.75% expected in December. Despite some challenges, GBP/USD is trading higher around 1.3510 during Asian hours, as the US Dollar faces expectations of further rate cuts from the Federal Reserve in 2026. Traders are looking forward to the Federal Open Market Committee Meeting Minutes on Tuesday for clues about the Fed’s future direction.

Currency Movements and Market Updates

Other movements in the currency market include EUR/GBP below 0.8750, rising USD/INR, and EUR/JPY dipping below 184.00. Gold and silver have come down from recent highs, while the Australian Dollar remains stable, thanks to the Reserve Bank of Australia’s position. In editorial picks, EUR/USD is testing support near 1.1750, GBP/USD shows an overall positive outlook, and gold is retreating from record highs. A 2025 guide highlights top forex brokers and various trading strategies. The pound sterling is struggling against the US dollar, with GBP/USD falling below 1.3500. Short-term dollar strength is currently influencing the market as we near year-end. However, expectations that the Federal Reserve will lower rates twice in 2026 are widespread. The Bank of England’s recent decision to lower its interest rate to 3.75% marks the beginning of a easing cycle for the UK. Governor Bailey has hinted at a gradual decline, which could apply gentle pressure on the pound in the coming months. Historically, the start of easing cycles, like in 2008, often leads to multiple rate changes, establishing a clear trend in currency pairs.

Market Implications and Volatility

On the flip side, the future of the US dollar depends on the Federal Reserve’s decisions, and recent data supports potential easing. The latest US PCE inflation report from November 2025 showed a drop to 2.4%, the lowest in over two years. This gives the Fed a reason to think about rate cuts next year. The FOMC meeting minutes on Tuesday will be closely watched for any signs that policymakers are considering this approach. With these contrasting trends, implied volatility in GBP/USD options has reached a three-month high. This scenario might be good for traders using straddle strategies, which benefit from significant price changes after upcoming news. For those with a clearer outlook, buying put options expiring in the first quarter of 2026 could help position for a gradual decline in the pound. We also see strength in the dollar affecting other assets, with traders taking profits on gold after it reached record highs. This indicates a broader, short-term shift into the dollar, but the long-term view for 2026 seems to suggest coordinated easing from major central banks. The current market movements are likely a temporary adjustment before the new year. Create your live VT Markets account and start trading now.

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