Sterling edged slightly higher against the US dollar and held broadly steady versus the euro on Wednesday, as investors awaited the Federal Reserve’s policy decision later in the session, along with UK GDP data due on Friday.

The US dollar weakened against both the euro and the yen as markets positioned for an interest-rate cut accompanied by a potentially hawkish message from the Fed.

The pound rose 0.10% against the dollar to 1.3313, after touching 1.3385 last week — its highest level since 21 October. The currency has gained about 1% since Finance Minister Rachel Reeves delivered the budget on 26 November.

Francesca Fornasari, head of currency at Insight Investment, said sterling had benefited from “post-budget relief,” noting that “a lot of bad news was already priced in before 26 November.”

Looking ahead, she added that the pound will need stronger growth-related data to outperform its European peers.

Some analysts pointed to modestly positive revisions to last week’s PMI figures, suggesting that the UK economy is not slowing as sharply as previously feared. Meanwhile, several companies reported delaying investment due to uncertainty surrounding Reeves’ budget.

Expectations for the UK’s growth outlook remain mixed.

Mark Dowding, chief investment officer at BlueBay at RBC BlueBay Asset Management, said: “Weaker UK growth expectations suggest there is room for the Bank of England to surprise markets with more rate cuts than currently priced in.”

UK GDP figures will be released on Friday.

Investors are also awaiting next week’s Bank of England rate decision. Several policymakers expressed differing views on Tuesday regarding the future of monetary policy, highlighting the continued division within the Monetary Policy Committee.

Markets are pricing a 50-basis-point cut by next summer, alongside a roughly 90% probability of a rate reduction next week.

The euro inched up 0.02% against sterling to 87.43 pence, after reaching 87.21 pence on Tuesday — its lowest level since 24 October.

Money markets have recently scaled back expectations for a potential rate cut from the European Central Bank, offering support to the euro.

Gold prices rose in the European market on Wednesday, extending gains for a second consecutive session, supported by a pause in the US dollar’s advance against a basket of major currencies and by a modest uptick in safe-haven buying of the metal.

However, the current rise remains limited as investors stay cautious ahead of the final Federal Reserve policy decision of the year. The central bank is widely expected to announce a third consecutive 25-basis-point rate cut, along with key updates on the projected path of interest rates through 2026.

Price Overview

• Gold prices today: Gold rose 0.3% to $4218.85 from an opening level of $4207.68, after hitting a low of $4201.12.

• At Tuesday’s settlement, gold gained 0.45% — its first increase in three sessions — with safe-haven inflows providing modest support.

US Dollar

The dollar index fell 0.2% on Wednesday, retreating from a one-week high and heading toward its first loss in three sessions, reflecting a pause in the US currency’s recent upward momentum.

Federal Reserve

The Federal Reserve concludes its final policy meeting of 2025 later today, with expectations pointing to a 25-basis-point cut in the federal funds rate — the third consecutive reduction this year.

The interest-rate decision, monetary-policy statement, and updated economic projections will be released at 19:00 GMT, followed by Chair Jerome Powell’s press conference at 19:30 GMT.

These updates are expected to offer stronger clarity on the direction of monetary policy and the likelihood of further rate cuts in 2026.

Kevin Hassett — the White House’s senior economic adviser and the leading candidate to succeed Powell — said Tuesday that there is “plenty of room” for deeper rate cuts, although persistently high inflation may alter the calculus.

Gold Outlook

• Kelvin Wong, market analyst for Asia-Pacific at OANDA, said investors are significantly repositioning ahead of the Fed’s policy decision.

• At FX News Today, our view is as follows: If the Fed’s updates and messaging turn out more aggressive than markets currently expect, the probability of additional rate cuts in 2026 may decline, placing stronger downward pressure on gold.

SPDR Fund

Holdings in the SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — fell by 1.14 metric tons on Tuesday, marking a third consecutive daily decline. Total holdings now stand at 1,047.97 metric tons, the lowest since December 3.

The euro edged higher in European trading on Wednesday against a basket of global currencies, marking its first positive move against the US dollar in five sessions. The advance came as the dollar’s recent upward momentum paused ahead of the Federal Reserve’s policy decision due later today.

With market expectations for a European rate cut in December fading, investors are also awaiting comments from European Central Bank President Christine Lagarde, who will participate in a panel discussion on the future of the euro and the dollar as global reserve currencies at the Financial Times Global Conference.

Investors hope Lagarde will offer clearer signals on the ECB’s policy outlook for 2026, especially as several eurozone economic indicators have shown notable improvement in recent weeks.

Price Overview

• Euro exchange rate today: the euro rose by less than 0.1% to $1.1629, from the opening level of $1.1625, and recorded a low of $1.1622.

• The euro ended Tuesday’s session down 0.1% against the dollar, marking a fourth consecutive daily loss, after strong US job-openings data.

US Dollar

The dollar index fell about 0.1% on Wednesday, retreating from a one-week high and heading toward its first loss in three sessions, reflecting a pause in the US currency’s recent rise against global peers.

Attention turns to the Federal Reserve’s decision later today, with markets nearly fully pricing in a 25-basis-point rate cut — the third consecutive cut this year.

Investors will scrutinize the Fed statement and policymakers’ projections for indications on the 2026 policy path, particularly amid easing inflation pressures and persistent concerns over economic growth.

European Interest Rates

• Money-market pricing for a 25-basis-point ECB rate cut in December remains below 10%.

• Reuters reported that ECB officials lean toward keeping interest rates unchanged at the December meeting.

Christine Lagarde

At 10:55 GMT, ECB President Christine Lagarde is scheduled to speak at the Financial Times Global Conference.

Euro Outlook

At Economies.com, we expect that if Lagarde delivers more hawkish remarks, market expectations for ECB rate cuts in the first half of next year will decline, providing additional support for the euro against the US dollar.

Japan’s yen rose in Asian trading on Wednesday against a basket of major and minor currencies, attempting to recover from a two-week low against the US dollar. The move was supported by a pause in the dollar’s advance ahead of the Federal Reserve’s policy decision due later today.

The Bank of Japan meets next week, and markets widely expect a 25-basis-point interest-rate hike. Investors are watching Governor Kazuo Ueda closely for clear signals on the policy path for 2026.

Price Overview

• Yen exchange rate today: the US dollar fell by about 0.2% against the yen to ¥156.56, from the opening level of ¥156.81, and recorded a high of ¥156.94.

• The yen ended Tuesday’s session down about 0.6% against the dollar, marking a third consecutive daily loss. It hit a two-week low at ¥156.96 after strong US job-openings data.

US Dollar

The dollar index fell about 0.1% on Wednesday, retreating from a one-week high and heading toward its first loss in three sessions, reflecting a pause in the US currency’s advance against a basket of global currencies.

All eyes are on the Federal Reserve’s decision later today, with markets pricing in a nearly certain 25-basis-point cut — the third consecutive rate cut this year.

Investors will scrutinize the Fed statement and policymakers’ projections for clues on the 2026 policy path, especially amid easing inflation pressures and persistent growth concerns.

Japan’s Interest Rates

• Following recent inflation and wage data, markets now price an over-80% probability that the Bank of Japan will raise rates by 25 basis points at its December meeting.

• Governor Kazuo Ueda last week offered a more optimistic outlook for Japan’s economy and said the Bank would examine the pros and cons of raising rates at the upcoming policy meeting.

• Three government officials told Reuters the Bank of Japan is likely to raise interest rates this December.

Bank of Japan

The Bank of Japan meets next week amid firm expectations of a 25-basis-point hike, which would lift the policy rate to around 0.75% — the highest level since 2008, before the global financial crisis.

Markets will watch Governor Ueda’s remarks closely for guidance on the 2026 trajectory, especially as expectations grow that the Japanese government may resort to more fiscal stimulus, complicating the policy landscape for the central bank.