Pound Climbs to Six-Week High
The British pound extended its advance above $1.335, trading at its strongest level since October 22, as investors brace for an almost certain rate cut from the Federal Reserve, while upbeat UK PMI data and optimism around the budget have added support.
Markets are now pricing in roughly a 90% probability that the Fed will deliver a 25 bps cut on Wednesday, with expectations for another two to three reductions next year as recent data continues to signal a cooling labor market. In the UK, the Bank of England is increasingly divided ahead of its December 18 meeting. Four hawkish policymakers remain wary of persistent inflationary pressures, while more dovish members argue that the economy is slowing and the labor market is loosening.
Governor Bailey is expected to cast the deciding vote, and markets also assign nearly a 90% chance of a cut to 3.75%. Adding to the outlook, the OECD this week projected that the BoE will cut rates twice more to 3.5% by June before pausing its easing cycle.
Source : Tradingeconomics.com
