The Pound Sterling (GBP) is trading sideways above the 1.2500 level against the US Dollar (USD) amid light holiday trading volume. The Federal Reserve (Fed) projects a slower pace of interest rate cuts in 2024 compared to previous expectations, with its dot plot indicating a target federal funds rate of 3.9% by the end of 2025.
The Pound Sterling trades back-and-forth above 1.2500 as trading volume is light amid holidays in global markets on account of Christmas Day. Fed policymakers see the fund rates heading to 3.9% by the end of 2025. Trades have fully priced in two interest rate cuts by the BoE next year. The Pound Sterling (GBP) trades sideways above the psychological support of 1.2500 against the US Dollar (USD) in Tuesday’s London session.
The GBP/USD pair consolidates as trading volume is low amid a holiday-shortened week due to Christmas Eve and Boxing Day on Wednesday and Thursday, respectively. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, also trades sideways around 108.15. More broadly, the Greenback remains on the front foot amid firm expectations that the Federal Reserve (Fed) will follow a more gradual interest rate cut approach for the next year. Fed policymakers see the central bank delivering fewer interest rate cuts than previously expected amid a slowdown in the disinflation process and uncertainty over the impact on the economy of incoming immigration, trade, and tax policies by President-elect Donald Trump. The recent Fed dot plot showed that officials see the federal funds rate heading to 3.9% by the end of 2025, suggesting that there will be more than one interest rate cut next year. According to the CME FedWatch tool, traders are pricing in that the central bank will leave interest rates unchanged in the current range between 4.25% and 4.50% for January's policy meeting. Looking at the US economic calendar for the rest of the week, Initial Jobless Claims for the week ending December 20, to be released on Thursday, is the only major economic indicator that could impact the US Dollar. The number of individuals claiming jobless benefits for the first time is estimated to come in at 218K, slightly lower than the former release of 220
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