The British pound slipped slightly against a firm U.S. dollar on Thursday as markets focused on President-elect Donald Trump’s anticipated Treasury Secretary announcement and its implications for U.S. growth, trade, and tax policies.
Sterling Performance and Market Dynamics
- GBP/USD: The pound dropped 0.1% to $1.26405, as the dollar retained its strength.
- EUR/GBP: Sterling gained 1.2% against the euro, which faced intense pressure as traders assessed potential eurozone growth challenges from Trump’s aggressive tariff policies.
Despite a brief lift from October’s UK inflation data, which confirmed expectations that the Bank of England (BoE) would remain cautious on rate cuts, sterling has declined nearly 2% against the dollar this month and turned negative for the year.
BoE Rate Cut Expectations
Money markets suggest a 68-basis-point rate cut by December 2024, but no change is anticipated at the BoE’s upcoming December 19 meeting.
Commerzbank strategist Michael Pfister noted just a 50% probability of a February rate cut, though he remains confident one will occur, citing restrictive monetary policy and concerns about staying ahead of the curve.
“If inflation data shows a sustained rise, discussions around a February cut are likely to intensify,” Pfister added.
Key Economic Data to Watch
The next major focus for traders will be the November PMI surveys for the UK, eurozone, and U.S., set to be released Friday.
- UK October PMI: Came in at 52, above the 50 threshold for growth and second only to the U.S.’s reading of 54.
- November PMI Forecast: Expected to slightly decline to 51.8, according to a Reuters poll.
