The Pound Sterling (GBP) remained under pressure on Thursday, trading near 1.3130 against the US dollar (USD), after weaker-than-expected United Kingdom (UK) GDP figures deepened concerns over the country’s slowing economic outlook.
UK GDP data underscores sluggish momentum
According to the Office for National Statistics (ONS), the UK economy expanded by just 0.1% in the third quarter, missing expectations of 0.2% and slowing from the 0.3% growth recorded in the previous quarter. On an annualized basis, GDP rose 1.3%, slightly below forecasts of 1.4%. Monthly data for September showed a 0.1% contraction, compared with expectations for flat growth, highlighting continued weakness in output.
Manufacturing and industrial activity also deteriorated sharply, with both sectors posting declines in September after temporary gains in August. Manufacturing production fell 1.7% month-on-month, while industrial production dropped 2%, reflecting softer demand and tightening credit conditions.
These signs of stagnation follow disappointing UK labor market data earlier in the week, which showed the unemployment rate rising to 5%, the highest level since February 2021. The combination of cooling growth and labor softness has heightened expectations that the Bank of England (BoE) may begin cutting interest rates as early as its December policy meeting.
BoE rate-cut bets intensify amid soft data
Market participants have strengthened bets on a December rate cut, viewing it as a necessary move to cushion the slowing economy. The recent run of weaker economic indicators has accelerated those expectations, with traders increasingly pricing in at least a 25-basis-point (bps) reduction next month.
Political uncertainty adds to the pressure
Adding to the strain on the pound, reports from multiple UK media outlets suggest that Prime Minister Keir Starmer could face an internal leadership challenge ahead of the Autumn Budget later this month. Any political turmoil amid the UK’s fragile fiscal position could unsettle markets and push gilt yields higher as investors demand greater compensation for risk.
US dollar steady as markets eye December Fed decision
In the US, the dollar eased slightly but remained supported by expectations of another Federal Reserve (Fed) rate cut in December. The US Dollar Index (DXY) traded around 99.30, near a 10-day low. According to the CME FedWatch Tool, markets assign a 67% probability of a 25-bps rate cut to the 3.50%–3.75% range, marking what would be the third consecutive rate reduction this year. A Reuters poll echoed this view, with 80% of economists expecting a December cut amid persistent labor market weakness.
Boston Fed President Susan Collins reinforced dovish expectations on Wednesday, noting that “it is prudent to normalize rates a bit further in 2025 as downside risks to the labor market have likely risen.”
Technical outlook: GBP/USD remains bearish below key resistance
From a technical standpoint, GBP/USD continues to trade below the 200-day Exponential Moving Average (EMA) near 1.3261, keeping the broader bias bearish. The 14-day Relative Strength Index (RSI) remains subdued below 40, suggesting weak momentum and the potential for further downside.
Immediate support lies at the April low near 1.2700, while resistance is seen at the October 28 high around 1.3370. A sustained break below 1.3000 would likely accelerate bearish pressure toward the 1.2700 region, whereas recovery attempts are expected to face selling interest near the 200-day EMA.
