Pound sterling (GBP) is attracting little bid against its major currencies on Thursday after the release of monthly UK gross domestic product (GDP) data for November.
The Office for National Statistics (ONS) has reported that the economy has once again plunged into the black. The data showed that GDP growth was 0.3%, which was faster than the estimate of 0.1%. The UK economy fell by 0.1% in September and October, after remaining flat in August.
Strong UK GDP data is expected to have a negative impact on dovish expectations from the Bank of England (BoE). At its December meeting, the BoE stated that monetary policy would remain on a gradual decline path.
On Wednesday, BoE policymaker Alan Taylor said he expected monetary policy to normalize at neutral levels “sooner rather than later” and that “on-target inflation from mid-2026 is likely to be sustainable.”
Meanwhile, data from British factories also turned out to be stronger than expected. Month-on-month (MoM) Industrial production grew at a solid pace of 2.1% against estimates of 0.5% and the October reading of 0.4%, revised down from 0.5%. Over the same period, industrial production rose 1.1%, stronger than expected of 0.1% but slower than the previous reading of 1.3%. On a year-over-year basis, both Industrial Processing and Industrial Production unexpectedly gained at a forceful pace.
Daily Digest Market Changes: The pound sterling is under pressure against the US dollar
- Sterling was under pressure at the start of the day as market sentiment remained uncertain due to renewed tariff tensions. On Wednesday, US President Donald Trump imposed a 25% tariff on the White House’s imports of certain advanced computer chips, including an Nvidia H200 AI processor and a similar AMD semiconductor called MI325X.
- Still, sterling is trading around 1.3425 against the US dollar during Thursday’s European trading session, as the US dollar strengthens on expectations that the Federal Reserve (Fed) will keep interest rates steady at its next meeting.
- At press time, the U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against six major currencies, is 0.15% higher to a near-month high of 99.26.
- According to CME’s FedWatch tool, the Fed is certain to leave interest rates unchanged in the 3.50%-3.75% range at its January policy meeting, indicating a pause in its monetary easing campaign. Over the last three meetings, the Fed has made three consecutive 25 basis point (bp) rate cuts in the face of delicate labor market conditions.
- Speculation that the Fed will leave interest rates unchanged is supported by expectations that the impact of recent cuts on the economy will not yet be perceptible. Data on the US Consumer Price Index (CPI) for December also showed on Tuesday that price pressure is steadily increasing.
- On Wednesday, Atlanta Fed Bank President Raphael Bostic stressed the need to maintain a tight monetary policy stance for the foreseeable future, citing that “the inflation challenge has not yet been overcome.”
Technical Analysis: GBP/USD is hovering near the 20-day EMA
At the time of writing, the GBP/USD rate has fallen to near 1.3436. The 20-day exponential moving average (EMA) at 1.3438 has flattened after a steady rise and the price is oscillating around it.
The 14-day Relative Strength Index (RSI) at 51.70 is neutral, indicating sustainable momentum.
Measured from the high at 1.3793 to the low at 1.3009, the 61.8% Fibonacci retracement at 1.3494 completes the bounce while the 78.6% Fibonacci retracement at 1.3625 looms overhead. A break at the top could extend the bounce towards the September 2025 high of 1.3726, while a rejection would keep it trading near the 20-day EMA.
(The technical analysis for this story was written with the aid of an AI tool.)
Sterling FAQs
The pound sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. As of 2022, it is the fourth most traded currency unit in the world, accounting for 12% of all transactions, with an average value of $630 billion per day. Its key trading pairs are GBP/USD, also known as “The Cable”, which makes up 11% of FX, GBP/JPY or “The Dragon” as traders call it (3%), and EUR/GBP (2%). The pound sterling is issued by the Bank of England (BoE).
The most vital factor influencing the value of the pound sterling is the monetary policy pursued by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a constant inflation rate of around 2%. The basic tool to achieve this goal is to adjust interest rates. When inflation gets too high, the BoE will try to contain it by raising interest rates, making access to credit more high-priced for citizens and businesses. 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 that economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to lower borrowing prices so that companies borrow more to invest in projects that generate economic growth.
The published data are used to assess the condition of the economy and may affect the value of the pound sterling. Indicators such as GDP, manufacturing and services PMIs and employment can influence the direction of the GBP exchange rate. A forceful economy is good for sterling. Not only will it attract more foreign investment, but it may prompt the BoE to raise interest rates, which will directly strengthen the British pound. Otherwise, if economic data is delicate, sterling is likely to fall.
The next vital data release for the pound sterling is the trade balance. This indicator measures the difference between what a country earns from exports and what the country spends on imports over a given period. If a country produces a highly sought after export, its currency will only benefit from the additional demand created by foreign buyers willing to buy those goods. Therefore, a positive net trade balance strengthens the currency and vice versa in the case of a negative balance.
