However, this relationship may weaken during UK-specific developments.Some analysts have recently indicated that the British currency has now recovered all the losses incurred in the run-up to last year’s Budget, and has benefited from the reduction in UK fiscal and political risks.
The pound was flat at $1.3500 against the dollar after reaching $1.3567 on Tuesday, its highest level since September 18.
The dollar was largely unchanged on Wednesday as investors awaited key US economic data later in the session.
“Barring any surprises here, we think the pound/dollar pair could trade around the 1.35 level for now as markets weigh the possibility of another Bank of England rate cut once the March meeting takes place,” said Matthew Ryan, head of market strategy at Ebury, citing the next economic data as a possible trigger. Maduro will be ousted this weekend,” he added.
Markets had fully priced in a BoE rate cut and a 60% chance of further easing by the end of the year.
Traders expect the European Central Bank to keep interest rates unchanged until early 2027.
The euro remained stable at 86.60 pence. On Tuesday the rate was 86.44 pence, the lowest level since mid-September.
“(Recent sterling outperformance suggests) that speculators are continuing to exit the short positions built up in the UK’s November Budget approach,” said Jane Foley, senior forex strategist at Rabobank.
“This may continue a little further in the short term, although the release of November’s monthly UK GDP data on January 15 should provide some new direction,” she added.
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