The British Pound edged up against Dollar following release of UK GDP and Industrial Production figures Thursday, yet broader bearish trend practically intact.
GBP/USD picked up to 1.3260 from session lows around 1.3250, but still shows 1.4% decline in last three days. Pair has fallen from just under 1.3450 start Tuesday to under 1.3300, trading near three-week low since mid-October.
UK Q3 GDP bounced up 0.7% in third quarter after downwardly revised 1% contraction in second, according to preliminary data released by ONS Thursday 07:00 GMT. Year-over-year growth accelerated to 1.9% from 1.4% in previous quarter, in both cases meeting market expectations.
Third quarter growth supported by strong Industrial Production, which rose 0.3% in September and 3.1% YoY, beating expectations of -0.3% and 2.9%, respectively. Manufacturing Production rose 0.7% in September, also beating. Index of Services increased 0.9% in three months to September.
Why pound still depressed:
- Fed tightening bets keep US dollar dips limited. US CPI rose 0.4% in October, more than forecast, and Fed Governor Waller told BoE conference Tuesday that December hike is likely, paving path for further tightening.
- BoE already hiked Nov 5 in 8-1 vote, its first hike in more than three years to 4.00% from 3.75%. Market had priced it. Chief Economist Huw Pill warned hike should not be seen as start of series, and Governor Bailey downplayed inflation, tempering expectations for sustained tightening cycle.
- UK Budget Oct 28 funded plans through taxes, but energy shock from Middle East war still weighs on households and services, which stalled.
GBP/JPY also muted, reversing modest dip to 212.00 mark, supported by 275bps rate differential as BoJ rate at 1.25% vs BoE 4.00%.
Next: ONS monthly GDP flat forecast for September already beaten, focus shifts to BoE Dec 17 decision.
Analysis:
Classic buy rumor sell fact. GDP beat was expected, industrial beat small, and after BoE hike pound has fallen four of five sessions. Market cares more about rate path forward than backward-looking growth. With US inflation hot and BoE signaling one-and-done rather than staircase, dollar strength overrides UK data. 1.3260 bounce is technical, not trend change.
Tags: #GBPUSD #BritishPound #UKGDP #IndustrialProduction #ONS #BoE #Fed #Dollar #FX