Pound rebounds mostly despite market experts expecting more interest rate cuts from the BoE in 2025 than market pricing.

In Monday’s London session, the Pound Sterling (GBP) rebounded against its major counterparts. Despite a small increase in the Bank of England’s (BoE) dovish projections for 2025, the British pound recovers marginally.

Traders price in a 53-basis point (bps) interest rate cut for the next year, up from the 46 bps estimated after the policy announcement on December 19, when The Bank of England (BoE) left borrowing rates unchanged at 4.75% in a 6-3 vote. Before the policy announcement, market participants expected only one member of the Monetary Policy Committee (MPC) to vote in favor of lowering interest rates.

This year, the Bank of England has been the slowest among European and North American countries in lowering interest rates. The Bank of England has dropped its benchmark borrowing rates by 50 basis points (bps), while other peers such as the Federal Reserve (Fed) and the European Central Bank (ECB) have lowered their borrowing rates by 100 bps. The Bank of Canada (BoC) and the Swiss National Bank (SNB) cut interest rates even further due to increased risks of inflation falling below their respective targets.

Goldman Sachs anticipates the BoE lowering interest rates in each quarter of the coming year.

“UK wage growth and service inflation have been far stickier than elsewhere, despite signs of material labor market rebalancing,” analysts at Goldman Sachs said in a note. “As a result, the BoE has been more cautious than other major central banks,” they added. However, the investment banking business predicts sustained quarterly cutbacks through 2025, more than what markets estimate, as a “weaker labor market cools underlying inflation.”

Daily Market Update: Pound Sterling rises against US Dollar.

At the start of the week, the pound sterling rose to around 1.2600 against the US dollar (USD). However, due to the low trading volume conditions before the New Year’s celebrations, the GBPUSD pair predicted to have moderate volatility. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slips below 108.00 but is projected to end The year saw almost 6.7% growth.

Despite the fact that the Federal Reserve (Fed) cut essential borrowing rates by 100 basis points (bps) to 4.25%-4.50% this year, the USD fared strongly. The greenback has risen dramatically in the previous three months following Republican Donald Trump’s victory in the US presidential election, as measures such as immigration control, higher import tariffs, and reduce taxes  predicted to be inflationary and pro-growth.

The Fed signaled fewer interest rate reduction in 2025, citing solid economic growth projections, a slowing of the disinflationary trend, and better labor market conditions than previously expected. However, Fed Chair Jerome Powell decline to provide guidance on the anticipated economic impact of Trump’s initiatives.

“It is quite premature to make any On December 18, Powell stated that he had reached some findings. “We don’t know what will be tariff, from what countries, for how long, in what size,” he told reporters.

US Dollar flattens amid illiquid trading conditions.

The Pound Sterling and the US Dollar will be heavily influenced this week by final estimates for S&P Global and the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for December.