**GBP/USD Gains After Gap-Down Open Amid US Dollar Weakness; Traders Eye FOMC Minutes**
GBP/USD climbed higher after opening lower, trading around 1.3510 during Asian hours on Monday. The pair found support as the US Dollar (USD) came under pressure, driven largely by growing expectations of two more rate cuts from the Federal Reserve (Fed) in 2026.
Market participants are now focusing on the Federal Open Market Committee (FOMC) December Meeting Minutes, due for release on Tuesday. These minutes are expected to shed light on internal policy debates and provide further insight into the Fed’s outlook for 2026.
At its December meeting, the Fed reduced the federal funds rate by 25 basis points (bps), bringing the target range to 3.50%-3.75%. Throughout 2025, the central bank implemented a cumulative 75 bps of rate cuts amid signs of a cooling labor market and persistent inflationary pressures.
According to the CME FedWatch tool, market odds point to an 81.7% probability that rates will remain unchanged at the Fed’s January meeting, up from 77.9% a week ago. Conversely, the likelihood of a 25-basis-point rate cut has fallen to 18.3% from 22.1% last week.
The latest US labor market data delivered mixed signals. Initial Jobless Claims dropped to 214,000 from 224,000 the previous week—beating the market forecast of 223,000. Meanwhile, Continuing Jobless Claims rose to 1.923 million from 1.885 million, and the four-week average of Initial Claims edged lower to 216,750 from 217,500.
On the UK side, the Bank of England (BoE) lowered its policy rate by 25 bps to 3.75% in December, with a closely split 5-4 vote reflecting lingering inflation concerns. Inflation in the UK cooled to 3.2% in November but remains firmly above the BoE’s 2% target.
In terms of economic growth, UK GDP expanded by 0.1% in the third quarter, matching expectations. However, the BoE projects flat growth in the final quarter. BoE Governor Andrew Bailey recently signaled that interest rates are likely to ease further, though any additional moves will be gradual and limited as rates approach their neutral level. He emphasized that future decisions will be carefully balanced and heavily dependent on incoming data.
**Key Takeaways:**
– GBP/USD rises as the US Dollar weakens.
– Fed rate cut expectations influence market sentiment.
– Traders await FOMC Meeting Minutes for policy insights.
– Mixed US labor market data adds to uncertainty.
– BoE rate cut and cautious outlook reflect ongoing inflation and growth concerns.
Stay tuned as key central bank decisions and economic data continue to shape the GBP/USD outlook.
https://bitcoinethereumnews.com/finance/gbp-usd-edges-higher-above-1-3500-eyes-fed-rate-cut-outlook/
