Sterling Stands Steady Amid Federal Reserve Speculations

The British pound remained stable against the dollar as markets anticipate both a U.S. Federal Reserve rate cut and October's UK GDP assessment. Despite a positive outlook from finance minister Rachel Reeves, traders remain cautious due to upcoming monetary policy shifts and economic data releases this week.

The British pound held its ground against the dollar on Tuesday, as traders prepared for a potential interest rate cut by the U.S. Federal Reserve and awaited UK GDP data for October. By 1231 GMT, Sterling remained unchanged at $1.332 against the dollar and flat against the euro at 87.335 pence, mirroring the dollar's stability across markets ahead of the Fed's rate decision.

Antonio Ruggiero, an FX and macro strategist at Convera, noted that while Sterling is currently holding above $1.33, it may face challenges if Federal Reserve Chair Jerome Powell adopts a hawkish tone. Finance Minister Rachel Reeves' unexpectedly positive budget has bolstered Sterling, pushing it to six-week highs and increasing its value by 1.2% since November 26.

The anticipation surrounding the budget also impacted retail behavior, with surveys indicating restrained consumer spending in November amid underwhelming Black Friday sales. Markets are currently predicting an 86% likelihood of the Bank of England cutting its interest rates by 0.25% to 3.75% in its upcoming December 19 meeting. Additionally, traders await the release of the UK's October GDP figures on Friday.

(With inputs from agencies.)