Pound Sterling jumps higher after UK revised Q3 GDP data

• The Pound Sterling trades higher against its major currency peers after the release of the UK Q3 GDP figures.
• Revised UK Q3 GDP data show that the economy grew QoQ in line with preliminary estimates of 0.1%.
• Fed’s Hammack argues against reducing interest rates further.

The Pound Sterling (GBP) attracts bids against its major currency peers and jumps 0.45% to near 1.3440 on Monday, following the release of the United Kingdom (UK) Q3 Gross Domestic Product (GDP) data. The Office for National Statistics (ONS) confirms that the economy grew at a quarterly pace of 0.1%, in line with preliminary estimates.

On an annualized basis, the UK economy also grew 1.3% as preliminary data showed.

The impact of the revised Q3 GDP figures is expected to be short-lived on the British currency, while investors remain concerned about how the economy is performing in the last quarter of the year.

Last week, the Bank of England (BoE) stated in its monetary policy statement that the staff forecast “zero growth in Q4 GDP”, following an interest rate cut by 25 basis points (bps) to 3.75% with a 5-4 majority vote. In October, the economy surprisingly declined by 0.1%, the data showed earlier this month.

Going forward, the major driver for the Pound Sterling will be market expectations for the BoE’s monetary policy outlook amid a light economic calendar week. In the monetary policy announcement on Thursday, the BoE reiterated that the rate path will remain “gradually downwards”.

Pound Sterling outperforms US Dollar ahead of flash US Q3 GDP data

• The Pound Sterling rises 0.45% to near 1.3440 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair gains as the US Dollar faces slight pressure, with investors turning cautious ahead of the preliminary United States (US) Q3 Gross Domestic Product (GDP) data scheduled for Tuesday.
• As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.25% lower to near 98.50.
• Investors will pay close attention to the US GDP data to get fresh cues on the current state of the economy. The numbers are expected to show that the US economy grew at an annualized pace of 3.2%, moderately from 3.8% in the second quarter.
• Signs of slowing US GDP growth might force traders to curtail bets supporting more interest rate cuts by the Federal Reserve (Fed) in the near term.
• Currently, there is a 22.5% chance that the Fed will cut interest rates by 25 bps to 3.25%-3.50% at the January meeting, the CME FedWatch tool shows.
• Fed dovish expectations remain slim even as the US Consumer Price Index (CPI) data for November showed on Thursday that price pressures grew moderately. As measured by the CPI, the headline and the core inflation cooled down to 2.7% and 2.6% year-on-year (YoY), respectively.
• Over the weekend, Cleveland Fed President Beth Hammack stated in a podcast interview with The Wall Street Journal (WSJ) that interest rates should remain at their current levels at least until the spring, adding that the latest inflation data was distorted by the Federal shutdown.

Technical Analysis: GBP/USD sees more upside above 1.3500

GBP/USD trades higher at 1.3415 at the start of the week. The 20-day Exponential Moving Average (EMA) slopes upwards, reinforcing a bullish bias as price holds a clear premium over the average. A sustained hold above the 20-day EMA at 1.3329 keeps the topside outlook intact.

The 14-day Relative Strength Index (RSI) at 62.89 confirms firm momentum without overbought signals.

Pullbacks could be absorbed by dip-buying near the 20-day EMA while the broader trend favors continuation. Looking up, the pair could strengthen on a decisive break above the horizontal resistance plotted from the October 17 high at 1.3471.

(The technical analysis of this story was written with the help of an AI tool.)