- GBP/USD gains ground to around 1.3235 in Wednesday’s early European session.
- Rising December Fed rate cut bets continue to undermine the US Dollar.
- Dovish BoE expectations might cap the upside for the major pair.
The GBP/USD pair gains traction to near 1.3235 during the early European session on Wednesday. The US Dollar (USD) remains weak against the Pound Sterling (GBP) amid growing expectations that the US Federal Reserve (Fed) will deliver a 25 basis points (bps) interest rate cut at its upcoming meeting next week.
Hopes for a December Fed rate reduction provide some support to the Greenback. Anticipation for a December cut has risen following dovish comments from Fed officials and recent signs of a cooling economy. According to the CME FedWatch Tool, there is nearly an 89% chance of a quarter-point rate cut at next week’s meeting.
Additionally, US President Donald Trump announced that he plans to name a new Fed chair in early 2026. Bloomberg reported earlier this week that Kevin Hassett is at the top of the list of potential candidates to succeed Jerome Powell as US Fed Chair. Hassett’s nomination could weigh on the USD as he is seen as the most dovish candidate.
On the UK’s front, softer inflation, a cooling labor market, and the Autumn November budget have reinforced bets for a December rate cut from the Bank of England (BoE). UK Prime Minister Keir Starmer emphasized the need to bring inflation and interest rates down to boost business investment and economic growth. A majority of analysts expect the UK central bank to cut interest rates to 3.75% in December, with markets pricing in a 90% chance. This, in turn, could act as a headwind for the major pair.
