GBP/USD moves upward, approaching 1.3480 during the early Asian session on Friday. Market participants anticipate further USD depreciation if the incoming Fed Chair pursues more aggressive interest-rate reductions as expected. The BoE anticipates that rates will follow a gradual downward trajectory; however, each future reduction will be a “closer call.” The GBP/USD pair shows resilience, approaching 1.3480 in the early Asian session on Friday. Anticipations surrounding the US Federal Reserve rate cuts this year exert pressure on the US Dollar in comparison to the Pound Sterling. Philadelphia Fed President Anna Paulson is scheduled to deliver remarks later this weekend.
The Greenback concluded 2025 experiencing its most significant annual drop in eight years. With a minimum of two rate reductions anticipated for this year, the Fed’s policy trajectory contrasts with that of the United Kingdom, diminishing the attractiveness of the USD. The financial markets are currently reflecting an approximate 15.0% probability that the Federal Reserve will reduce interest rates during its upcoming meeting in January, as indicated.
Furthermore, expectations that US President Donald Trump will appoint a more dovish successor to Fed Chair Jerome Powell, whose term concludes this year, could lead to a decline in the USD. Trump indicated his expectation that the forthcoming Fed Chairman will maintain low interest rates and refrain from any disagreement with him. The remarks are expected to amplify apprehensions among stakeholders and decision-makers regarding the autonomy of the Federal Reserve.
Conversely, the Bank of England anticipates that rates will persist on a gradual decline, offering some backing to the Cable. The UK central bank lowered interest rates from 4.0% to 3.75% during its December policy meeting, marking the lowest level in almost three years. During the press conference, Governor Andrew Bailey indicated that rates are expected to follow a gradual downward trajectory, but he noted that “how much further we go becomes a closer call” with each reduction.