The Pound Sterling (GBP) extended its decline on Thursday after a series of weaker-than-expected UK economic data releases raised fresh concerns about the health of the British economy. Softer Q3 GDP growth and labour market weakness have reinforced expectations that the Bank of England (BoE) could shift toward an easing stance at its December meeting.
UK Growth Slows More Than Expected
According to the Office for National Statistics (ONS), the UK economy grew by just 0.1% in the third quarter, below consensus forecasts of 0.2% and the 0.3% expansion recorded in the previous quarter. On an annualized basis, GDP increased 1.3%, slightly weaker than both the 1.4% growth reported earlier and economists’ expectations.
Monthly figures showed a 0.1% contraction in September, compared with projections for flat growth. Meanwhile, Manufacturing Output and Industrial Production both registered sharp monthly declines of 1.7% and 2.0%, respectively, reversing gains seen in August.
The disappointing figures point to a slowing economy as high borrowing costs and softening demand weigh on business activity.
Labour Market Weakness Adds to Economic Worries
Earlier this week, labour data showed that the UK Unemployment Rate rose to 5.0% in the three months to September — the highest since February 2021 — adding to evidence of cooling economic momentum.
The combination of sluggish growth and rising joblessness has heightened expectations that the BoE could cut interest rates in December, particularly after policymakers signaled concern about deteriorating labour conditions.
Political Uncertainty Clouds Outlook
Adding to the Pound’s pressure, reports in British media suggest that Prime Minister Keir Starmer may be facing internal challenges from allies seeking to replace him ahead of the upcoming Autumn Budget later this month. Political instability amid rising fiscal debt risks could further unsettle investors and drive UK gilt yields higher.
Currency Market Overview
| Base Currency | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| GBP | +0.09% | -0.09% | — | -0.08% | +0.06% | -0.34% | -0.03% | -0.16% |
The Pound Sterling was the weakest major currency on Thursday, losing the most against the Australian Dollar (AUD) amid broad risk-on sentiment following the reopening of the US government.
US Dollar Pressured by Rate Cut Expectations
Despite the Pound’s underperformance, the GBP/USD pair managed to recover modestly to 1.3165, rebounding from an intraday low near 1.3100, as the US Dollar Index (DXY) fell to around 99.15, its lowest in almost two weeks.
The Greenback remains under pressure amid firm market bets that the Federal Reserve (Fed) will deliver another 25 basis-point rate cut in December. The CME FedWatch Tool shows a 67% probability of such a move, which would mark the third consecutive rate reduction this year.
A Reuters poll indicated that 80% of economists now expect a December rate cut, citing weakness in US labor market data.
Meanwhile, Boston Fed President Susan Collins reiterated her support for a looser policy stance, stating that “it is prudent to normalize rates a bit further in 2025 as downside risks to the labor market have likely risen.”
On the political front, President Donald Trump signed a spending bill to reopen the government after a 43-day shutdown, the longest in US history.
Technical Outlook: GBP/USD Faces Resistance Below 200-Day EMA
The GBP/USD pair continues to trade in a bearish structure, hovering around 1.3130 during Thursday’s European session. The pair remains below its 200-day Exponential Moving Average (EMA) at 1.3261, signaling persistent downward bias.
The 14-day Relative Strength Index (RSI) remains subdued below 40, reflecting weak bullish momentum. A fresh move lower could develop if the RSI resumes its descent.
- Support: 1.2700 (April low)
- Resistance: 1.3370 (October 28 high)
Summary
- UK Q3 GDP slows to 0.1%, below forecasts.
- Unemployment Rate rises to 5.0%, highest since early 2021.
- Political uncertainty adds to bearish sentiment.
- GBP/USD trades below key technical resistance at 1.3261, maintaining a bearish outlook.