GBP/USD rises to approximately 1.3510 in the early European session on Wednesday. The BoE interest rate is expected to follow a steady decline. Market participants prepare for the US Initial Jobless Claims report scheduled for release later on Wednesday. The GBP/USD pair is currently trading positively around 1.3510 in the early European session on Wednesday. The Pound Sterling strengthens against the Greenback on expectations that the Bank of England will follow a gradual monetary easing path in 2026.
The UK central bank implemented a widely anticipated rate cut to 3.75% last week, yet indicated that the threshold for any additional reductions remains elevated due to ongoing inflation concerns. Increasing expectations of a more gradual approach to monetary easing by the BoE may offer some support to the Cable versus the US Dollar in the short term. Market expectations suggest that the BoE is likely to implement at least one rate cut in the first half of the year, with nearly a 50% chance of a second cut before the end of the year, as reported.
Conversely, the stronger-than-anticipated US economic data may support the USD and pose a challenge for the major pair. On Tuesday, the Bureau of Economic Analysis released data indicating that the US Gross Domestic Product experienced a growth rate of 4.3% on an annualized basis in the third quarter (Q3). This reading exceeded the market consensus of 3.3% and followed a growth of 3.8% in Q2.
Markets are expected to stay subdued as the Christmas holiday approaches. Market participants will look for additional insights from the US Initial Jobless Claims data later today. The market consensus was for 223,000 initial jobless claims for the week ending December 13, compared to 224,000 in the previous reading.