The USD is undergoing a broad decline, reaching a level unseen in over three months against GBP.  Christopher Waller, a Federal Reserve Governor and prominent advocate for stricter monetary policies, suggested the potential for a future reduction in interest rates on Tuesday. This statement has sparked market speculation that interest rates in the United States might have peaked.

Rate futures in the US are now signalling a 33% chance of a rate cut in March, a significant increase from the 21% probability observed late on Monday. Furthermore, the likelihood of a rate reduction in May has surged to around 65%, up from approximately 50%.

GBP/USD has also been supported by clear signals from the Bank of England indicating that there won't be any imminent cuts to UK interest rates, this has dashed the increasing market expectations that up to four rate reductions would be implemented in 2024.

The waning bets on rate cuts had softened UK monetary conditions, posing a risk of undoing the impact of prior rate hikes. Consequently, influential figures at the Bank of England have resisted this trend, emphasizing the necessity for interest rates to stay at 5.25% for an extended duration.

If the incoming data in the U.S. and UK doesn't reveal any surprises, these trends could persist through December, with the next major level of resistance at the key 1.28 level for the GBP/USD.