Sterling remained lackluster against the dollar on Monday, as a survey showed a decline in British business confidence and traders digested the recent Federal Reserve-led rise in the greenback.
British business confidence fell to its lowest level since 2024 in December, although employers are somewhat more optimistic about the economy in general, according to a survey published on Monday.
GDP figures released on Monday also showed Britain's economy stagnated in the third quarter of the year, revised down from a previous estimate of 0.1% growth.
“We think 2025 will be a better year for the economy than 2024. But the most recent data suggests the economy doesn't have much momentum heading into the end of the year,” said Paul Dales, an economist in head for the UK at consultancy Capital Economics in a note.
On Friday, the pound hit a one-month low of $1.2475, before turning around and closing the day up 0.5% against the greenback, after a busy week in shares of the share of central banks.
The British pound struggled to maintain this rebound on Monday and was down 0.18% against the dollar at $1.2544.
The Bank of England held interest rates on Thursday, but the central bank's Monetary Policy Committee was more divided on the decision than markets had expected.
Traders now expect rates to fall by around 56 basis points next year, up from 45 basis points just before the decision.
On the other side of the Atlantic, the Fed on the contrary lowered its rates as planned on Wednesday, while showing caution, which led to a rise in the dollar, with the dollar index closing the week up 0 .8%.
The pound, one of the best performing currencies of the year against the dollar, is now down 1.45% year to date against the greenback.
The euro fell slightly against the pound on Monday, with the euro at 82.90 pence.
European Central Bank President Christine Lagarde said the euro zone was “very close” to meeting the ECB's medium-term inflation target, according to an interview published in the Financial Times on Monday.
This holiday week, trading volumes are expected to be reduced as markets prepare for the start of next year.
