Pound Sterling rebounds slightly as UK GDP turns positive
- The Pound Sterling recovers slightly against its peers, following a stronger-than-expected UK GDP data for November.
- UK monthly GDP expanded 0.3%, beating estimates of 0.1% and the previous reading of -0.1%.
- The US Dollar gains on expectations that the Fed will hold interest rates steady in the meeting later this month.
The Pound Sterling (GBP) attracts slight bids against its major currency peers on Thursday, following the release of the United Kingdom (UK) monthly Gross Domestic Product (GDP) data for November.
The Office for National Statistics (ONS) has reported that the economy is back into black strongly. The data showed that the GDP growth was 0.3%, faster than estimates of 0.1%. In September and October, the UK economy declined by 0.1% after remaining flat in August.
Strong UK GDP figure is expected to impact the Bank of England (BoE) dovish expectations negatively. At the December meeting, the BoE guided that the monetary policy will remain on a gradual downward path.
On Wednesday, BoE policymaker Alan Taylor stated that he expects “monetary policy to normalise at neutral sooner rather than later,” and “at-target inflation from mid-2026 is likely to be sustainable”.
Meanwhile, UK factory data has also come in stronger than projected. Month-on-month (MoM) Manufacturing Production grew at a robust pace of 2.1% against estimates of 0.5% and the October reading of 0.4%, revised lower from 0.5%. In the same period, Industrial Production rose 1.1%, stronger than expectations of 0.1%, but slower than the prior reading of 1.3%. On an annualized basis, both Manufacturing and Industrial Production unexpectedly gained at a strong pace.
Daily Digest Market Movers: Pound Sterling is under pressure against US Dollar
- Earlier in the day, the Pound Sterling was under pressure as market sentiment remained risk-off due to renewed tariff tensions. On Wednesday, United States (US) President Donald Trump imposed 25% tariffs on imports of some advanced computing chips by the White House, which include the Nvidia H200 AI processor and a similar semiconductor from AMD called the MI325X.
- Still, Sterling trades lower against the US Dollar around 1.3425 during the European trading session on Thursday as the US Dollar strengthens on expectations that the Federal Reserve (Fed) will hold interest rates steady in the next meeting.
- During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near the monthly high of 99.26.
- According to the CME FedWatch tool, the Fed is certain to leave interest rates unchanged in the range of 3.50%-3.75% at the January policy meeting, indicating a pause in the monetary-easing campaign. In the last three meetings, the Fed delivered three consecutive 25-basis-point interest rate cuts (bps) amid weak job market conditions.
- The speculation that the Fed will leave interest rates steady is backed by expectations that the impact of the latest cuts is yet to be seen in the economy. Also, the US Consumer Price Index (CPI) data for December showed on Tuesday that price pressures grew steadily.
- On Wednesday, Atlanta Fed Bank President Raphael Bostic emphasized the need to maintain a restrictive monetary policy stance in the near term, citing that the “inflation challenge has not been won yet".
Technical Analysis: GBP/USD wobbles near 20-day EMA
GBP/USD trades lower to near 1.3436 at the time of writing. The 20-day Exponential Moving Average (EMA) at 1.3438 has flattened after a steady ascent, with price hovering around it.
The 14-day Relative Strength Index (RSI) at 51.70 is neutral, indicating balanced momentum.
Measured from the 1.3793 high to the 1.3009 low, the 61.8% Fibonacci retracement at 1.3494 caps the rebound, while the 78.6% Fibonacci retracement at 1.3625 looms overhead. A topside breach could extend the recovery toward the September 2025 high of 1.3726, whereas rejection would keep range-bound trade around the 20-day EMA.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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