2025 has been a volatile year for currency markets worldwide, driven not only by frequently changing trade policies but also by regime shifts in monetary policy from central banks. Inflation has started to abate for most economies, but this doesn’t apply as well to the US and UK, which isolated themselves from their key trading partners. Both the BoE and Fed hold the highest interest rates among OECD nations. Let’s dive into a Cable check as year-end volatility subsides.
December has been quite a hectic month as traders finally received up-to-date US economic data, leading to the recent FOMC rate cut (to 3.75%).
But the US hasn’t been the only country receiving key data and publishing interest rate decisions, as the Bank of England also cut its rates to 3.75% last Thursday.
Who will maintain the highest rates in 2026? This question is a good one to ask, as higher relative rates should hint at further currency strength relative to their major forex peers.
The data to keep an eye on is the inflation rate for both the UK and the US, as the employment picture for both nations is expected to correct gradually. Barring any major surprise in employment or tariff-led inflation, the UK holds the higher inflation out of both, and swap-traders are projecting fewer rate cuts for the BoE.
Since the end of November, movement in Cable has been characterized by a weakening US dollar as traders aggressively priced the December Fed cut (from 20% to a near 100% pricing in three weeks).
Following the Bank of England meeting, the pair moved from 1.3050 lows to 1.3450 highs, trading in a swift bull channel. However, as momentum reached overbought levels and the key central bank meetings have concluded, the action is settling within a 1,000-pip range.
Holding between 1.3350 and 1.3450 since December 16, with volatility traditionally abating during golden-week trading, the range has a high probability of holding.
Watch for potentially high bid-offer spreads as many market makers and traders take their time off. But with fewer traders in the market, some opportunities may arise.
GBP/USD 8H chart, December 22, 2025. Source: TradingView. Past performance is not indicative of future results.
Resistance levels
- Range resistance 1.3450 to 1.34650
- Bank of England session highs 1.3456
- Resistance zone around 1.35
- Resistance around 1.36 zone
Support levels
- 1.3350 Range support
- Pivotal support 1.3260-1.33
- November support 1.3170 - 1.31850
This article and its contents are intended for educational purposes only and should not be considered trading advice. Forex trading is high risk. Losses may exceed deposits.
