Bloomberg – In December, the GBPUSD reached a new high, surpassing the $1.27 threshold for the first time since late August. This surge was influenced by the Bank of England’s (BoE) hawkish stance, contrasting with the Federal Reserve’s more dovish approach. During its December meeting, the BoE kept its Bank rate steady, as anticipated, but emphasized the necessity of maintaining higher interest rates for an extended period to curb inflation.
The BoE continues to predict that it will take about two years for inflation to align with its target, reinforcing the importance of high borrowing costs. This stance challenges the push for quick rate cuts, especially after the significant downturn in October’s GDP. Meanwhile, the Fed’s indication of multiple rate cuts next year has further strengthened the sterling, marking a clear divergence in monetary policy approaches.