The British Pound (GBP) continues to face pressure against the US Dollar (USD), trading near an eight-month low of 1.2400 during Friday’s North American session. The US Dollar’s strength is driven by market expectations that the Federal Reserve will reduce interest rate cuts this year, bolstered by improving economic conditions in the United States.
The Federal Reserve’s latest Summary of Economic Projections revealed a higher end-of-2025 target for the federal funds rate at 3.9%, up from September’s 3.4% forecast. This hawkish outlook has fueled a rally in the US Dollar Index (DXY), which hit a two-year high above 109.00 on Thursday.
Adding to the USD’s momentum, the latest US Initial Jobless Claims dropped to 211,000 for the week ending December 27, marking an eight-month low and signaling a resilient labor market. Analysts attribute the Dollar’s gains to optimism around tighter immigration policies, higher import tariffs, and tax reforms under President-elect Donald Trump’s administration.
Meanwhile, the Bank of England (BoE) is anticipated to cut interest rates by 60 basis points this year, further weighing on the Pound’s performance. Investors are closely watching the release of the US ISM Manufacturing PMI for December, expected at 48.4, to gauge future economic activity.
With contrasting monetary policy outlooks between the Federal Reserve and the Bank of England, the GBP/USD pair is likely to remain under pressure in the coming sessions.