GBP/USD price faces pressure as Fed hawkish stance counters U.K. inflation data
GBP/USD falls as Fed cuts rates and UK inflation data lags
The GBP/USD pair faced renewed bearish pressure after the U.S. Federal Reserve (Fed) delivered a quarter-point rate cut to bring the federal funds rate to a range of 4.25%-4.5%, its lowest level in two years. While the cut aligned with market expectations, the Fed’s dot-plot projections revealed only two rate cuts in 2025, down from four in September.
Fed Chair Jerome Powell underscored a cautious approach to further easing, citing persistent inflation above the 2% target. This hawkish outlook boosted demand for the U.S. dollar, driving GBP/USD below the 1.2600 mark.
GBP/USD chart (Nov 2024 - Dec 2024) Source: Trading View
UK inflation provides temporary relief
Earlier in the day, the pound briefly found support as UK Consumer Price Index (CPI) data for November showed a year-over-year rise to 2.6%, up from 2.3% in October. Core CPI, which excludes volatile food and energy prices, climbed to 3.5% from 3.3%, though it fell slightly below market expectations of 3.6%. Services inflation held steady at 5.0%, also marginally below estimates. The data reflected persistent inflationary pressures, bolstering expectations that the Bank of England (BoE) would maintain its current monetary policy in its upcoming decision.
As the BoE prepares to announce its monetary policy, traders will closely monitor its guidance on tackling domestic inflation. Meanwhile, U.S. economic data—including Initial Jobless Claims, Existing Home Sales, and the final Q3 GDP reading—will provide additional direction for the GBP/USD pair. Analysts suggest the pair could face further volatility as both central banks navigate inflation and growth concerns.
Previously, we discussed GBP/USD’s stability around 1.2700 as traders awaited key economic updates from the BoE and Fed, driven by inflation data and policy expectations.
