Sterling Slips as BoE Cuts Expected While ECB Holds Firm, Dollar Steadies Ahead of US Data.

• USD – Remains firm overall but markets are tightly focused on US inflation data for fresh direction.

• EUR –  Steadies as ECB expected to holds rates, benefitting modestly against sterling but constrained by broader risk flows.
  

• GBP – Weakens on expected BoE easing with volatility around the decision and future guidance.

USD:

The USD has held broad gains against major peers, buoyed by demand for haven assets and anticipation of upcoming US inflation data. The Fed delivered a rate cut earlier this month, and while future actions remain data-dependent, recent statements from Fed officials have tempered expectations of aggressive easing. The dollar’s strength has contributed to defensive trading in both GBP and EUR crosses, with limited directional bets ahead of key data releases like US CPI today. The dollar’s trajectory remains tied to U.S. data releases (notably CPI today) and evolving expectations for future Fed moves, especially as markets price in the potential path of monetary policy into early 2026.

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EUR: 

The European Central Bank is expected to keep interest rates rates unchanged at current levels, delivering its last policy decision of 2025 with no adjustment. The Governing Council emphasised a neutral stance, with fresh macroeconomic projections being the focus rather than policy change. EUR has been relatively steady but trading range-bound as participants weigh eurozone data and central bank guidance ahead of US inflation figures. With ECB policy on hold and inflation near target, the euro may be supported structurally versus pound and dollar, but overall gains remain capped by broader dollar dynamics.

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GBP: 

The Bank of England is expected to trim the Bank Rate by 25 bps to 3.75% — its fourth cut this year — responding to slowing inflation and weakening economic data. Markets had fully priced this move after UK inflation fell sharply to 3.2% in November and GDP contracted recently. Sterling came under pressure as rate cut expectations solidified, with GBP weaker against both USD and EUR ahead of the announcement. Even as rates are lower, some analysts highlight that positioning has been extremely short sterling, which might limit further declines in the very short term. With the BoE signal likely dovish, markets are watching forward guidance for 2026 rate expectations. Any messaging implying further cuts could weaken GBP further.

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