The British pound (GBP) dipped by 0.2% against major currencies on Thursday, settling around 1.3420 against the US dollar. This movement followed the release of the UK’s monthly gross domestic product (GDP) data for November.
The Office for National Statistics (ONS) announced that the economy has returned to a surplus. The GDP growth rate was reported at 0.3%, exceeding expectations of 0.1%. In contrast, the UK economy had contracted by 0.1% in both September and October, having remained flat in August.
This favorable GDP data could, perhaps, complicate the Bank of England’s (BoE) typically dovish outlook. At their meeting in December, the BoE indicated a gradual downward revision of monetary policy going forward.
On Wednesday, Alan Taylor, a key figure at the Bank of England, mentioned he anticipated “monetary policy to normalize to neutrality sooner rather than later,” adding that “the inflation target from mid-2026 is likely to be sustainable.”
Additionally, factory statistics in the UK showed better performance than expected. Manufacturing increased by 2.1% month-on-month, which was significantly higher than the anticipated 0.5% and the revised down figure of 0.4% seen in October. Industrial production also rose by 1.1%, surpassing the expected growth of 0.1%, although it was slightly below the previously reported 1.3%.
Daily Digest Market movements: British pound falls against the US dollar
- The pound was under pressure earlier in the day, as market sentiment leaned toward risk aversion due to renewed tariff tensions. Recently, US President Donald Trump placed a 25% tariff on imports of certain advanced computing chips, notably including Nvidia’s H200 AI processor and AMD’s MI325X semiconductor.
- As a result, the pound fell to about 1.3425 against the dollar during European trading, with the dollar gaining strength amid expectations that the Federal Reserve will maintain interest rates during their next meeting.
- The U.S. Dollar Index (DXY), which tracks the dollar against six major currencies, saw a 0.15% increase, nearing its monthly high of 99.26.
- It appears likely that the Fed will keep interest rates within the 3.50-3.75% range during its January policy meeting, suggesting a pause in monetary easing according to the CME FedWatch tool. Rates had been cut by 25 basis points in the last three meetings, largely influenced by weak job market conditions.
- There’s a prevailing sentiment that the Fed’s latest rate cut hasn’t yet fully manifested in economic impact. The December consumer price index (CPI) statistics released on Tuesday indicated steadily increasing price pressures.
- On Wednesday, Atlanta Fed President Rafael Bostic emphasized the need for a cautious monetary policy approach, asserting that “we have not yet won the challenge of inflation.”
Technical Analysis: GBP/USD maintains 50% Fibonacci retracement at 1.3400
GBP/USD has settled around 1.3420 at the moment. The 20-day exponential moving average (EMA) stands at 1.3438 and appears to have leveled off after a consistent increase.
The 14-day Relative Strength Index (RSI) is neutral at 49.23, showing balanced momentum.
In terms of Fibonacci retracement, the measure from the high of 1.3793 to the low of 1.3009 indicates that the 61.8% level at 1.3494 is currently limiting any rebound, while the 78.6% retracement at 1.3625 looms above. If an upward movement breaks this ceiling, there could be an extension towards the September 2025 high of 1.3726, but a rejection would keep the pair trading in a range near the 20-day EMA.
