Pound Sterling fell as UK GDP grew at a slower-than-expected rate and manufacturing activity decreased in November.
Pound Sterling is under selling pressure in Thursday’s European session, following the release of the United Kingdom’s (UK) monthly Gross Domestic Product (GDP) and factory data for November. The Office for National Statistics (ONS) revealed that the economy resumed growth after declining in October. However, the growth rate was lower than expected. The economy increased by 0.1% after contracting at a similar rate in October. Economists predicted the economy to have grown by 0.2 percent.
Manufacturing and industrial production figures fell in November on both a monthly and annual basis. Monthly, Industrial and Manufacturing Production fell by 0.4% and 0.3%, respectively. The rate of reduction was slower than that seen in October. Economists projected Industrial Production to increase by 0.1%, while Manufacturing Production was expected to remain steady.
Signs of ongoing weakness in UK factory activity suggest that producers are not fully utilizing their operating capacity, assuming that the already weak demand environment will deteriorate further once United States (US) President-elect Donald Trump imposes steep import tariffs globally once he takes office.
However, there are growing predictions that the Bank of England’s (BoE) monetary policy easing will be less gradual this year would provide some relief to manufacturing owners. Traders increased their BoE dovish bets following the release of the UK Consumer Price Index (CPI) data for December on Wednesday, which indicated signs of decreasing price pressures.
The Traders have increased their dovish wagers on the BoE’s February policy meeting.
Pound Sterling is under selling pressure. Traders believe the BoE will cut interest rates by 25 basis points (bps) to 4.5% at its February policy meeting, with an 84% possibility.
Cooling price pressures have provided some respite to Chancellor of the Exchequer Rachel Reeves, causing a stop in the rise in rates on UK gilts. 30-year UK gilt yields have fallen to 5.28% from 5.47%, their highest level in more than 26 years. The British currency has seen a considerable fall in the last few trading days due to increasing UK gilt yields. year would provide some relief to manufacturing owners. Traders increased their BoE dovish bets following the release of the UK Consumer Price Index (CPI) data for December on Wednesday, which indicated signs of decreasing price pressures.
Traders believe the BoE will cut interest rates by 25 basis points (bps) to 4.5% at its February policy meeting, with an 84% possibility.
Cooling price pressures have provided some respite to Chancellor of the Exchequer Rachel Reeves, causing a stop in the rise in rates on UK gilts.
Cooling price pressures have provided some respite to Chancellor of the Exchequer Rachel Reeves, causing a stop in the rise in rates on UK gilts. 30-year UK gilt yields have fallen to 5.28% from 5.47%, their highest level in more than 26 years. The British currency has seen a considerable fall in the last few trading days due to increasing UK gilt yields. The tendency of disinflation has not yet stalled.
According to the CME FedWatch tool, traders expect the Fed will decrease interest rates more than once this year, with the first coming in June. Prior to December’s inflation statistics, markets expected only one interest rate cut in September.
For fresh clues on the interest rate outlook, investors will look to the US Initial Jobless Claims data for the week ending January 10 and the Retail Sales data for December, both of which will be released at 13:30 GMT.
