Pound Weakens as BoE Signals Gradual Rate Cuts in 2025

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The GBP/USD pair is under pressure around 1.2510 during Thursday's Asian session, primarily due to the stronger US Dollar (USD). The expectation that the Federal Reserve will slow down its rate cuts this year is boosting the Greenback against the Pound Sterling (GBP).

In its December meeting, the Fed reduced the Federal Funds Rate to a range of 4.25% to 4.5%, down from 4.5% to 4.75%. Fed Chair Jerome Powell emphasized caution regarding further rate reductions due to persistently high inflation, signaling a revised outlook with fewer rate cuts expected in 2025. The Fed now anticipates only two rate cuts, compared to the previously forecasted four.

Meanwhile, the Bank of England (BoE) also faces dovish sentiment, with Governor Andrew Bailey advocating for a gradual approach to rate cuts, which has led to downward pressure on the GBP. Bailey also pointed to potential geopolitical risks and trade uncertainties ahead of Donald Trump’s return to the White House, suggesting that these factors could hamper the already-weakening UK economy.

Paraphrasing text from "FXSTREET" all rights reserved by the original author.