Company: FXB
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0000950170-25-027271
Chunk: 33

Company: Invesco CurrencyShares British Pound Sterling Trust
Filing Date: 2025-02-26
Form: 10-K
Item: Item 1B
Chunk 33
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’s higher-for-longer rhetoric and sticky US inflation pushed out expectations for rate cuts, boosting the dollar. However, British inflation also held up better than expected, dimming rate cut bets for the Bank of England, and provided some support on the downside. In Q3, a resilient UK economy and stubborn inflation kept a more hawkish tone on BoE easing expectations, while the Fed kicked-off its easing cycle in September, with a large 0.50% cut. Higher rates boost the appeal of a country’s currency, in this case, the sterling. However, a soaring greenback to end the year, driven by President Trump’s victory, erased all earlier gains. Many of his campaigned policies were expected to raise inflation risk, potentially leading to higher rates in 2025. In addition, tariffs generally weigh on foreign currencies, further boosting the USD.

The British pound sterling (GBP/USD) ended 2023 in positive territory. While in the first quarter, the sterling was largely driven by US dollar moves, the Bank of England’s aggressive rate hikes to tame stubborn domestic inflation helped the pair rally significantly through March onwards. The USD fell in early-March through early May on expectations for a dovish Fed pivot, especially in the midst of the banking sector turmoil and contagion fears. However, the dollar rebounded in May as the Fed signaled that there was potential for more interest rate hikes before year-end. The sterling spiked again in June as the hawkish BoE returned to center stage and the dollar retreated. While the pair was heavily pressured in the third quarter as recession concerns grew in the UK leading the BoE to pause its tightening while the Fed maintained its higher-for-longer narrative, the pair recovered sharply in the fourth quarter on renewed dollar weakness as rate cut expectations in the US became more concrete.

Additionally, the interest rate paid by the Depository has generally trended downward over the past year to thecurrent interest rate of 3.26%, as set forth in the FXB Rate Chart above. As long as the Sponsor’s fee and the interest expense on currency deposits, if any, exceed interest income, the Trust will incur a net comprehensive loss.

 Critical Accounting Estimates 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Sponsor’s management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period covered by this report.  

In addition to