Sterling trimmed some of its losses against the Dollar on Thursday after UK economic data showed stronger-than-expected growth in November, although the figures did not alter expectations for the Bank of England’s policy rate.
Traders are currently pricing in around 40 basis points of rate cuts by September.
UK GDP posted its fastest growth since June, supported by Jaguar Land Rover returning to full production following a cyberattack that disrupted the carmaker and its supply chain.
Yet despite the upside surprise, the data remain far from robust. UK economic activity is at best moderate and uneven, largely constrained by low confidence in the Labour government, say analysts.
The Pound traded slightly lower at $1.3443, down 0.05% at the time of writing, after earlier losses of around 0.10% ahead of the data release.
The Dollar strengthened as markets put aside concerns over the Federal Reserve’s independence and turned their attention to economic indicators, Reuters news agency reports.
The broader picture remains that the UK economy has slowed since the summer. This soft patch is expected to continue into 2026, driven by ongoing job losses and fiscal consolidation.
Analysts noted that investors are focusing on economic data, as the earlier support for Sterling from easing UK fiscal and political risks following Chancellor Reeves’ November budget has waned.
The next UK CPI inflation figures are not expected until 21st January.
Meanwhile, the Euro climbed 0.15% to 86.54 pence.
Wednesday’s release of China’s full-year 2025 trade data highlighted a sensitive issue for the UK – the potential diversion of Chinese goods originally destined for the US market.
Exports of Chinese goods to the UK grew 7.8% year-on-year in 2025, while shipments to the EU rose 8.4%.