The British Pound Sterling is holding onto its gains, closely tied to the Federal Reserve's recent rate cut. But here's where it gets interesting: investors are now eagerly awaiting the UK's monthly GDP figures, which could significantly impact the Pound's trajectory.
In the coming week, the UK's Office for National Statistics will release a series of critical economic data points, including the monthly GDP for October, labor market data, and the Consumer Price Index (CPI) for November. These releases will provide a comprehensive picture of the UK's economic health and shape expectations for the Bank of England's (BoE) upcoming decision.
The GDP report, due on Friday, is particularly crucial. It's expected to show a 0.1% expansion, a positive sign after the previous month's contraction. A strong start to the fourth quarter could boost growth outlook optimism, especially as the UK's fiscal watchdog has recently raised its GDP projection for the year to 1.5%.
Within the GDP data, investors will also scrutinize the Manufacturing and Industrial Production figures. Given the low base effect, both indicators are anticipated to show monthly increases.
On the monetary policy front, traders are increasingly confident that the BoE will cut interest rates by 25 basis points (bps) to 3.75% next week. This expectation is driven by the weak job market conditions currently prevailing in the UK.
The Pound Sterling's performance today is also worth noting. The table below details the percentage changes of the British Pound against major currencies, with the Pound strongest against the Australian Dollar.
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The heat map below illustrates the percentage changes of major currencies against each other, with the base currency on the left and the quote currency on top. For instance, the percentage change displayed for GBP/USD represents the British Pound (base) against the US Dollar (quote).
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In terms of market movers, the Fed's projection that goods inflation will peak in the first quarter of 2026 has been a key driver. The Pound Sterling has traded close to a seven-week high against the US Dollar, with the GBP/USD pair firmly holding its ground.
The US Dollar Index (DXY) has been vulnerable, trading near a seven-week low. The Fed's rate cut on Wednesday, along with its cautious guidance and dovish elements, has put pressure on the Dollar. The Fed's statement noted a recent uptick in unemployment and a lower revision of inflation expectations.
Before the policy outcome, investors had anticipated a halt in the monetary expansion cycle, given that inflation had remained well above the 2% target for an extended period. However, Fed Chair Jerome Powell's hawkish comments, stating that the bar for further rate cuts is high, have added a layer of complexity.
In Thursday's session, investors will focus on the US Initial Jobless Claims data for the week ending December 5. The number of individuals claiming jobless benefits is expected to rise to 220K, higher than the previous reading of 191K.
Technically, the Pound Sterling is trading firmly against the US Dollar, holding above the rising 20-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is bullish, indicating positive momentum. As long as the GBP/USD pair remains above the 20-day EMA, bulls could push the advance towards the October 17 high. However, a daily close below that EMA could shift the bias to neutral and potentially push the pair lower.
(This technical analysis was assisted by an AI tool)
So, what do you think? Will the UK's economic data releases support the Pound's gains, or will we see a shift in sentiment? Share your thoughts in the comments!
