The British pound (GBP) has been under pressure recently, primarily due to dovish speculation surrounding the Bank of England (BoE). Analysts point out that the uncertainty surrounding the UK economy has led to increased bets on possible rate cuts by the BoE, with expectations suggesting multiple reductions might occur in 2026. This sentiment was echoed recently, leading to a defensive outlook for sterling, particularly ahead of the GDP data release, which is forecasted to show only a modest recovery.
In recent developments, UK fund managers anticipate heightened volatility in the pound, with nearly half planning to increase foreign exchange hedging in 2026 to mitigate risks. This shift reflects broader concerns among investors about the pound's outlook. On the trading front, the pound has weakened against the euro, particularly as the market anticipates an interest rate cut by the BoE on December 18. In contrast, the GBP has recently strengthened against the US dollar, climbing to a five-week high around 1.3395, which is notably above its 3-month average of 1.3317 and reflects a stable trading range.
GBP to EUR is currently experiencing a decline, now positioned at 1.1407, touching 7-day lows just below its 3-month average. This movement encapsulates a trading range around 1.1322 to 1.1562 over the past few months. Conversely, GBP to JPY remains robust at 208.2, exceeding its 3-month average of 203, indicative of more favorable conditions in this currency pair.
As currency forecasts develop, it will be essential to monitor economic indicators and policy decisions closely, as shifts in market sentiment could impact the pound's trajectory as 2025 wraps up. Forecasters suggest that ongoing developments with the BoE and economic performance will play a critical role in shaping the future value of sterling in the forex market.
