British Pound remains depressed despite upbeat UK GDP and industrial output data

• GBP/USD edged up to 1.3260 from session lows near 1.3250 but remains 1.4% down in the last three days.
• UK economy expanded in the third quarter, in line with expectations amid a strong performance of the industrial sector.
• The US Dollar remains strong as recent US inflation data pave the path for further Fed tightening in December.
  

The British Pound (GBP) edged up against the Dollar (USD) following the release of UK Gross Domestic Product (GDP) and Industrial Production figures on Thursday, yet with the broader bearish trend practically intact. The GBP/USD pair has picked up to 1.3260 from session lows around 1.3250, but it still shows a 1.4% decline in the last three days.

UK Q3 Gross Domestic Product (GDP) bounced up 0.7% in the third quarter after a downwardly revised 1% contraction in the second, according to preliminary data released by National Statistics on Thursday. The year-over-year (Y-o-Y) growth accelerated to 1.9% from 1.4% in the previous quarter, in both cases meeting market expectations.

The third quarter’s economic growth was supported by strong Industrial Production, which rose 0.3% in September and 3.1% Y-o-Y, beating expectations of -0.3% and 2.9%, respectively. The Index of Services, which measures the sector’s gross value added, increased 0.9% in the three months to September following a similar growth in the previous month.

Fed tightening bets keep US Dollar dips limited

The US Dollar, on the other hand, keeps marching higher against most peers. October’s US consumer inflation figures and comments from a string of Federal Reserve (Fed) policymakers have boosted hopes that the central bank will hike rates by at least 25 basis points at its December meeting.

Strategists at Rabobank argue that “diminished fears about political interference on the Fed are a supportive factor for the USD,” helping to shore up confidence in US monetary policy.

Looking ahead, “reduced concerns over the credibility of the greenback should allow it more opportunity to benefit from the US’s robust economic growth performance,” says Rabobank in a note.

More Fed speakers will meet the press on Thursday. Among them are Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly, who have already shown their concern about high inflation earlier this week, as well as the influential New York Fed President, John Williams, who has been hinting at another rate hike before the year-end. The risk for the US Dollar is skewed to the upside.