The Pound Sterling (GBP) trades slightly lower versus the US Dollar (USD), consolidating after a strong budget-driven rally. With key UK data due later in the week and the December 18 BoE meeting approaching, market attention remains on guidance for the 2026 rate path, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

BoE rate outlook adds uncertainty

"The pound is entering Monday’s NA session with a fractional decline vs. the USD as it trades somewhat defensively from the mid-1.33s following its impressive budget-driven rally from late November. Fundamental releases have been limited, and this week’s data are concentrated toward the end of the week with industrial production and trade scheduled for Friday."

"BoE headline risk is elevated ahead of the December 18 rate decision, despite broad expectations for a 25bpt cut, as market participants consider the outlook and guidance around the rate path for 2026. Markets are currently pricing in one additional 25bpt cut by June however the latest communication from policymakers has highlighted risk to both sides."