GBP/USD moved sideways and tended to hover above the 1.3300 area during Thursday's Asian session. After bouncing from around 1.3310 (a one-week low), the pair is now fluctuating slightly around 1.3370 as the market awaits two major triggers: the Bank of England (BoE) decision and the US inflation (CPI) release.
The BoE is scheduled to announce its policy today, and the market is widely expecting a 25 bps interest rate cut, following a pause in November. These expectations were further strengthened by weaker UK inflation data, which automatically weighed on the pound.
The latest data showed UK CPI in November at 3.2% (YoY), down from 3.6% in October and below the 3.5% forecast. Meanwhile, core CPI also fell to 3.2%, lower than 3.4% in October. These figures signal that price pressures are starting to ease, giving the BoE room to ease policy.
An additional reason for the BoE to be more "loose" comes from the labor market situation. The UK unemployment rate reportedly rose to its highest level since early 2021. The combination of slowing inflation and rising unemployment makes the possibility of an interest rate cut seem increasingly plausible.
However, the GBP hasn't fallen sharply immediately because the USD hasn't been able to strengthen consistently. The market still expects the Fed to cut interest rates twice in 2026, given signs of a weakening US labor market and the prospect of a replacement Fed chair, who is seen as more dovish. So for now, GBP/USD is holding back: the UK side is pressuring the pound, but the US side is also keeping the dollar from strengthening too much. (asd)
Source: Trading Economics