Markets lower on last trading day of the year

Yahoo Finance UK’s Pedro Goncalves reports:

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The pound remained steady against the dollar in early European trading on the final day of 2024, hovering around $1.2552. As traders prepare for what is expected to be a volatile 2025, market sentiment towards sterling is cautious.

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Karl Schamotta, chief market strategist at Corpay, forecasts a challenging year ahead for the pound, driven by a combination of domestic economic hurdles, potential interest rate cuts, and external pressures, including shifts in US policy.

“We think the Bank of England will cut rates more aggressively than markets anticipate in the near term, limiting the extent to which interest differentials can support the currency against the euro,” Schamotta said. The strategist believes this dynamic will weigh on the pound’s performance, particularly in the early part of the year.

Despite the expected difficulties, Schamotta points to potential recovery opportunities later in 2025. “While the pound could suffer along with its global counterparts if the greenback extends its recent strength in the first quarter, we expect a recovery to take hold once markets have more soberly evaluated the likely direction of US policy,” he added. As a result, he suggests that GBP/USD could break the $1.30 mark by the year’s end.

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The pound is set to end the year as the top-performing major currency against the dollar.

Meanwhile, the sterling was also flat against the euro (GBPEUR=X), at €1.2056.