- The Pound Sterling rises even though investors expect the BoE to follow a less gradual policy easing cycle in 2025 than previously anticipated.
- Traders project at least two BoE interest rate cuts of 25 bps next year.
- US Initial Jobless Claims surprisingly fell to 219K last week.
The Pound Sterling (GBP) gains against its major peers on Friday, with investors looking for fresh cues about how the Bank of England (BoE) will follow the interest rate cut path in 2025. The latest BoE policy announcement in mid-December indicated a dovish buildup as the nine Monetary Policy Committee (MPC) voted 6-3 to keep interest rates on hold, a bigger split than the 8-1 economists had predicted.
A higher number of BoE officials voting for an interest rate cut has led traders to gradually raise dovish bets for 2025. Markets currently see a 53-basis points (bps) reduction in interest rates in 2025, up from 46 bps after the BoE policy announcement on December 19, suggesting that there will be at least two meetings in which officials will reduce key borrowing rates by 25 bps.
Meanwhile, BoE Governor Andrew Bailey has not guided a specific policy easing path for 2025, citing heightened uncertainty in the United Kingdom (UK) economy.
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