The British pound is trading near a three-month high against the dollar, buoyed by expectations of less aggressive interest rate cuts from the Bank of England compared to the US Federal Reserve. This relative yield advantage, coupled with ongoing geopolitical tensions, is supporting the pound despite some mixed domestic economic data.
- The British pound traded around $1.346, near a three-month high of $1.352 reached on December 23.
- Markets anticipate at least two rate cuts by the Fed this year, potentially pressuring the dollar.
- Only one additional rate cut by the Bank of England is fully priced in for 2026.
- Geopolitical tensions, including US actions regarding Venezuela, contribute to global uncertainty.
- UK mortgage approvals fell slightly less than expected.
- Consumer borrowing surged to a two-year high in November, driven by credit-card spending.
The outlook for the British pound appears favorable, as the expected monetary policy divergence between the UK and the US lends support. While global uncertainty adds a layer of complexity, domestic economic indicators, such as consumer borrowing, suggest continued economic activity, potentially offsetting concerns from slightly weaker mortgage approvals.