Photo by Colin Watts on Unsplash 
 

The GBP/USD pair stalls the previous day's pullback from the vicinity of mid-1.3400s and a nearly two-month high, though it struggles to attract meaningful buyers during the Asian session on Friday. Spot prices currently trade around the 1.3380-1.3385 region, up only 0.05% for the day, amid mixed cues.

The British Pound (GBP) draws support from the Bank of England's (BoE) hawkish rate cut on Thursday, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. As was expected, the BoE MPC voted 5-4 to lower the benchmark interest rate by 25 basis points (bps) to 3.75%. A close vote split, however, revealed differences within the committee, especially after this week's inflation surprise. This, in turn, forced investors to scale back their expectations for more aggressive easing next year.

Apart from this, the emergence of some intraday US Dollar (USD) selling following the release of softer US consumer inflation figures provides an additional boost to the GBP/USD pair. Data published by the US Bureau of Labor Statistics (BLS) showed that the headline US Consumer Price Index (CPI) rose 2.7% from a year earlier in November, falling short of the 3.1% expected. Moreover, the core CPI, which excludes volatile food and energy prices, also missed expectations and rose by 2.6% YoY last month.

The crucial data reaffirmed market bets for more interest rate cuts by the US Federal Reserve (Fed) in 2026 and weighed on the USD. The initial market reaction, however, turned out to be short-lived, which, in turn, prompted some intraday selling around the GBP/USD pair. Meanwhile, dovish Fed expectations keep the USD bulls on the defensive and assists the currency pair to defend a technically significant 200-day Simple Moving Average (SMA). This, in turn, backs the case for a further appreciating move.

More By This Author: