Breaking News in GBP: The Pound Remains Unfazed Despite the UK GDP Being Hit by Strike Action

Market Analytics and Considerations

Key Notes

• The UK’s services industry contributes to higher GDP estimates than before COVID.
• UK strikes restricting growth of the pound.
• Risen wedge breach is approaching.

GBP/USD BASELINE BACKGROUND

Although the British pound’s response to the UK GDP beat this morning was subdued, once the European session got underway, there might have been a more positive reaction. The UK GDP data performed better than expected across practically all criteria (see the economic calendar beneath) and succeeded to surpass the pre-COVID threshold from February 2020.

The largest contribution to the GDP for the month of October was the services sector (blue), and following a dismal month in September, the assistance was certainly welcomed. The news is positive for the UK economy as a whole because the services sector makes up the majority of the GDP.

The ONS research highlighted the UK and Europe’s deteriorating energy crisis by stating that “power, fuel, steam, and air conditioning supply constituted the largest negative influence” from the perspective of production. Following the G7 meeting and their determination to impose a price restriction on Russian oil, Russia may attempt to further reduce supplies, which might have a negative influence on future GDP figures and, subsequently, the sterling.

Aiming ahead, the weak GBP reaction could be due to worries about strike action in the UK’s public and private sectors, where PM Rishi Sunak’s administration is thinking to fill the voids with military troops.

With the 1.2154 swing trough and 200-day SMA in focus after a daily candle closure, cable appears to be attempting ascending wedge support. This week’s crucial economic data will be the driver of either an upside or a negative break, depending on the outcome.

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