The GBP/USD exchange rate moved steadily around 1.3465 in early Asian trading on Wednesday (December 31). This relatively calm movement occurred because trading volume was expected to be thin ahead of the New Year holiday. However, signals from the Bank of England that it was still open to gradual interest rate cuts provided some support for the pound sterling against the US dollar.

At its December policy meeting, the Bank of England cut interest rates to 3.75%, the lowest level in almost three years. Governor Andrew Bailey emphasized that the policy direction remains downward, but the magnitude of future cuts is increasingly difficult to predict. Markets expect at least one more rate cut in the first half of this year, with the possibility of additional cuts before the end of the year.

Meanwhile, in the United States, the Federal Reserve also cut interest rates by 25 basis points in December. However, the minutes of the latest meeting showed a more cautious stance, with some officials opting to hold rates while waiting for inflation to truly subside. The market is now pricing in a high probability that the Fed will keep interest rates unchanged at its January meeting, keeping GBP/USD trading likely to remain flat in the short term. (az)

Source: Newsmaker.id