As we head into the final weeks of the year, the Pound has been progressively strengthening against both the EUR and USD. However, with a number of key data points and increased global political tensions, whether Sterling can hold on to these gains remains the question on everyone’s lips.

The first major release between the US, UK, and Eurozone came on Wednesday in the form of US CPI data. This is closely analysed by traders for indications of the Fed’s rate cut path. The previous reading came in at 2.6%, above October’s figure of 2.4%. This made the latest reading particularly significant as the market waited to see if inflation in the US was back on the rise. Ultimately, the result came in slightly higher than the previous reading, at 2.7%. While this was largely priced into the market, and therefore did not result in significant movement, it does indicate that inflation remains persistent in the US, albeit at a much more manageable level.

On Thursday, the ECB announced its latest interest rate decision, with forecasts predicting a 25-basis-point cut. This was largely expected by the market, as has been the case with many recent decisions. However, GBP/EUR reached multi-year highs following ECB President Christine Lagarde’s press conference, during which she alluded to further rate cuts on the horizon. These gains were short-lived, though, as another poor GDP result out of the UK erased them this morning. The UK economy showed yet another contraction, this time of -0.1%, compared to forecasts of a 0.1% uptick. This disappointing figure caused the Pound to lose considerable ground against both the USD and EUR.

Looking ahead, next week will be dominated by central bank decisions, with both the Federal Reserve and the Bank of England set to announce their latest interest rate policies. The Fed is forecast to cut rates by 25 basis points, while the BoE is expected to hold rates at their current levels. This scenario could lead to an upswing in cable as we move into the week ahead.