Pound Sterling gained value, rising 0.45% to nearly 1.3440 after the UK released its updated Q3 GDP data. The Office for National Statistics confirmed a quarterly growth rate of 0.1% for the UK economy, matching earlier estimates. The Bank of England’s decision to ease monetary policy may affect how the British pound performs against other currencies. In particular, the Australian (AUD) and New Zealand dollars (NZD) could benefit from expected rate increases, which would impact their exchange rates with GBP.

Market Movements

The DOW Jones Industrial Average climbed over 200 points as the holiday season approaches. At the same time, the US Dollar weakened, and gold prices rose due to growing geopolitical tensions and expectations of Federal Reserve rate cuts. In other forex updates, the USD/CAD faced pressure ahead of the Canadian GDP data. The USD/CHF also slipped before important surveys and releases. Meanwhile, EUR/USD began to recover, as GBP/USD moved toward 1.3450 because of a declining USD. In the investment community, some top brokers of 2025, especially those with low spreads or high leverage, were discussed. The conversation also included the best trading platforms and regional preferences.

Monetary Policy Divergence

The Bank of England’s ongoing easing cycle is our main focus right now. The Bank cut its key rate to 3.75% earlier this month and is likely to implement more cuts in early 2026. This trend is putting continuous pressure on the Pound Sterling. While today’s confirmation of the Q3 GDP at 0.1% growth gave the pound a temporary boost toward 1.3450, we view this as a minor development. The overall trend shows a slowing economy, with November’s inflation dropping to a two-year low of 2.1%. This was the reason for the central bank’s actions. Thin trading during the holiday season can amplify the effects of small data releases. We should pay attention to currency pairs where monetary policies are diverging significantly, especially against the Australian and New Zealand dollars. For instance, the Reserve Bank of Australia is keeping its rate steady at 4.5% due to ongoing wage growth, creating a clear policy gap. This situation makes using options to bet on a lower GBP/AUD a smart strategy as we head into January. Trading the Pound against the US Dollar is more complicated because expectations for Fed rate cuts are also rising. However, futures markets are pricing in only a 70% chance of a single Fed cut in January, while we anticipate the BoE to be more aggressive in the first quarter. Thus, any rise in GBP/USD should be seen as a chance to take short positions. This scenario reminds us of the period after the 2016 Brexit vote when continued BoE support resulted in the Pound’s long-term decline. In the option markets, the one-month risk reversal for GBP/USD is at -0.4, showing that puts are more expensive than calls. This indicates that market sentiment is already geared toward further declines in Sterling. Create your live VT Markets account and start trading now.

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