GBP: BoE's easing cycle weighs on currency – HSBC

FXStreet Insights Team FXStreet

HSBC analyzes the implications of the Bank of England's (BoE) recent rate cut on the British pound (GBP). The report notes that the BoE's ongoing easing cycle may lead to the GBP underperforming against other currencies like the AUD and NZD, which are expected to see rate increases.

BoE cuts rates, GBP faces challenges

"The Bank of England (BoE) cut its policy rate by 25bp to 3.75% on 18 December, marking the sixth cut in the current easing cycle."

"The meeting’s tone was rather hawkish, as the guidance indicated that 'judgements around further policy easing will become a closer call.'"

"As the BoE is likely to continue to lower rates in 2026, the GBP will probably underperform against other G10 currencies whose policy rates are already at neutral levels or are set to rise, such as the AUD and NZD."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD bounces off multi-month low; bulls seem hesitant above mid-0.6800s

AUD/USD edges higher during the Asian session on Wednesday, recovering some of the previous day’s losses to its lowest level since March as the US Dollar stalls the hot US CPI-inspired rally amid hopes of a US-Iran peace deal. Meanwhile, hawkish comments from FOMC members have raised odds for a 50 bps rate hike in December, which favors USD bulls and should cap the Aussie amid expectations of a cautious, on-hold RBA stance.

USD/JPY remains capped below 159.00 amid looming intervention risks

USD/JPY struggles to build on the previous day’s strong gains to a near one-month top as intervention risk supports the Japanese Yen while hopes of a US-Iran peace deal cap the safe-haven US Dollar. Meanwhile, traders have started pricing in the probability of a 50 bps Fed rate hike in December in reaction to Tuesday’s hot US CPI report and hawkish comments from FOMC members. This favors USD bulls and should limit the downside for the currency pair.

Gold seems vulnerable below $4,050 as hawkish Fed bets favor USD bulls

Gold steadies following the overnight decline, trading near $4,035-$4,040 during the Asian session on Wednesday as US-Iran peace deal hopes cap the post-US CPI US Dollar rally. Meanwhile, the possibility of a jumbo 50 bps Fed rate hike in December could limit the downside for the USD and cap the non-yielding bullion, warranting caution for bullish traders.

Bitcoin, crypto market fall as hot US inflation triggers $700 million in liquidations

Bitcoin declines toward $73,000 on Tuesday following October's hotter-than-expected US Consumer Price Index report, which triggered renewed concerns about the Federal Reserve's interest rate outlook.

Five risks for the global economy in 2027

From AI bubbles to geopolitical breakthroughs, these are some of the five ways why this outlook could go wrong – or right: A severe correction in US stocks triggered by an AI meltdown, second-round inflation effects emerge at scale or geopolitical de-escalation delivers an energy peace dividend.

Gold reclaimed $4,100. Tuesday’s CPI test decides if it holds

Gold (XAU/USD) starts the week on a positive note, reclaiming the $4,100 psychological level as the US Dollar (USD) retreats from its recent highs. The precious metal recovers from Friday's losses, although investors remain cautious ahead of Tuesday's US Consumer Price Index (CPI) report, which could determine the next direction for Bullion.