The British pound (GBP) recently showed signs of resilience, buoyed by a risk-on sentiment in the broader market. Sterling benefitted from weaker performance in other major currencies, allowing it to gain ground against several rivals. However, the absence of significant UK economic data could lead to a lack of clear direction for the pound in the short term.
In recent developments, UK fund managers are responding to ongoing volatility by planning to increase foreign exchange hedging in 2026, signaling growing caution regarding the pound. Meanwhile, there’s been a noticeable divergence in central bank policies affecting the pound's performance. The GBP has weakened against the euro, reflecting investor expectations of a potential interest rate cut from the Bank of England on December 18. In contrast, the pound has appreciated against the U.S. dollar, rising to a five-week high at 1.3326, underpinned by improved UK economic growth forecasts and a more gradual approach to interest rate adjustments by the Bank of England.
From a technical perspective, the GBP to USD is trading at 1.3326, close to its three-month average and maintaining stability within a 4.8% range. Against the euro, GBP to EUR is nearing 1.1447, sitting at a 30-day high and also reflecting very stable behavior, trading within a 2.2% range. When measured against the yen, GBP to JPY at 206.7 is notably 2.1% above its three-month average, suggesting a measured upward trend.
Market analysts note that the outlook for the British pound will heavily depend on upcoming economic indicators and central bank actions. The anticipated divergence in monetary policy between the Bank of England and the European Central Bank will likely continue to shape market sentiment, influencing GBP's trajectory in the weeks to come.
