Key Takeaways
- The Pound Sterling (GBP) gains against its major peers, except antipodeans, ahead of the UK’s monthly Gross Domestic Product (GDP) and factory data release.
- The UK Office for National Statistics (ONS) is expected to show that the economy expanded 0.1% in November, with Manufacturing Production growing steadily by 0.5% and Industrial Production remaining broadly flat.
- The UK GDP growth data will drive market expectations for the Bank of England’s (BoE) monetary policy outlook, with investors paying close attention to the current state of the economy.
- The US Dollar remains broadly firm, with the US Dollar Index (DXY) edging down to near 99.10, but still close to its monthly high near 99.26.
- Technical analysis shows that the GBP/USD pair remains close to its 20-day Exponential Moving Average, with a close above the average potentially improving near-term traction.
Introduction to the Pound Sterling’s Performance
The Pound Sterling (GBP) has gained against its major peers, except antipodeans, on Wednesday, ahead of the United Kingdom’s (UK) monthly Gross Domestic Product (GDP) and factory data release. The British currency is trading higher, with investors eagerly awaiting the release of the UK’s economic data, which will provide insight into the current state of the economy. The UK Office for National Statistics (ONS) is expected to show that the economy expanded 0.1% in November, with Manufacturing Production growing steadily by 0.5% and Industrial Production remaining broadly flat.
Economic Indicators and Their Impact on the Pound Sterling
The UK GDP growth data will drive market expectations for the Bank of England’s (BoE) monetary policy outlook. Investors will pay close attention to the current state of the economy, as the UK GDP declined by 0.1% in both September and October after remaining flat in August. The data will also influence the BoE’s decision on interest rates, with the central bank guiding that monetary policy will remain on a gradual downward path. BoE policymaker Alan Taylor has stated that he expects interest rates to fall to their neutral levels soon, citing that price pressures could return to target by mid-2026.
US Dollar Performance and Its Impact on the Pound Sterling
The US Dollar remains broadly firm, with the US Dollar Index (DXY) edging down to near 99.10, but still close to its monthly high near 99.26. The US Dollar gained sharply on Tuesday after the release of the US Consumer Price Index (CPI) data for December, which showed that both headline and core inflation remained steady at 2.7% and 2.6% year-on-year (YoY), respectively. This has firmed expectations that the Federal Reserve (Fed) will not cut interest rates in its policy meeting later this month. However, US President Donald Trump has continued to increase pressure on Fed Chair Jerome Powell to cut interest rates further, while praising steady inflation figures.
Technical Analysis of the GBP/USD Pair
The GBP/USD pair remains close to its 20-day Exponential Moving Average, with a close above the average potentially improving near-term traction. The Relative Strength Index (RSI) at 52 (neutral) edges higher, but still reflects balanced momentum. Measured from the 1.3780 high to the 1.3006 low, the 50% Fibonacci retracement at 1.3393 acts as resistance on rebounds, while the 61.8% retracement at 1.3485 caps the upside. A close above the latter would signal that the bearish trend is fading and could extend the recovery, while failure there would keep the pair range-bound.
Global Central Banks’ Support for the Fed
Chiefs of global central banks have shown support towards Fed Chair Jerome Powell over his criminal charges, which he called a "pretext" for refraining from following the president’s preferences. Chiefs from the European Central Bank (ECB), the BoE, and nine other central banks said collectively that "independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve", and "we stand in full solidarity with the Fed System and its Chair Jerome H. Powell". This show of support highlights the importance of central bank independence and the need for policymakers to make decisions based on economic data and not political pressure.
Conclusion and Future Outlook
In conclusion, the Pound Sterling’s performance will be closely watched in the coming days, as investors await the release of the UK’s economic data and the BoE’s monetary policy decision. The US Dollar’s firmness and the Fed’s policy meeting will also influence the GBP/USD pair’s movement. With technical analysis showing that the pair remains close to its 20-day Exponential Moving Average, a close above the average could improve near-term traction. However, the pair’s movement will ultimately depend on the economic data and central banks’ decisions, making it essential for investors to stay informed and up-to-date with the latest developments.
