The British Pound is showing resilience, paring losses against the US Dollar and hovering around the $1.34 level. This comes after UK economic growth figures exceeded expectations, with GDP rising 0.3% in November. Market expectations for monetary easing by the Bank of England have adjusted slightly, now pricing in around 46 basis points of cuts by year-end. The focus now shifts to upcoming US data releases for further market direction.
- UK GDP rose 0.3% in November, surpassing forecasts of 0.1% increase.
- Over the three months to November, GDP expanded 0.1%, defying consensus expectations of a 0.2% contraction.
- Market expectations now price in around 46 basis points of cuts by year-end.
- An 84% probability of a second 25-basis-point reduction is priced in for December.
- A first rate cut remains fully priced in by June, with an 88% chance it will occur in April.
- GBP/USD holds above 1.3400 after testing the 1.3450 neighborhood.
- BOE policymaker Alan Taylor expects interest rates to fall to their neutral levels soon.
- The US Dollar Index (DXY) edges down to near 99.10.
- US Producer Price Index (PPI) data for October and November will be published.
The UK economy’s positive growth figures are providing a boost to the British Pound, leading to a slight adjustment in expectations for monetary policy easing. While rate cuts are still anticipated, the timeline and extent of these cuts are being reassessed in light of the improved economic outlook. This could potentially support the Pound in the near term, although external factors like US data releases and global central bank policies will continue to play a significant role in its valuation.