British Pound jumps after strong UK monthly GDP data

The British Pound (GBP) attracts significant bids against its peers, with the GBP/USD pair rising to near 1.3518, as the United Kingdom (UK) Office for National Statistics (ONS) has reported strong monthly Gross Domestic Product (GDP) data for July. Th

The ONS has reported that the economy expanded at a pace of 0.4%, stronger than 0.3% in June. Financial markets expected the GDP data to remain flat.

Meanwhile, monthly Industrial and Manufacturing Production data has also come in higher than expected. Industrial Production grew by 0.2%, while it was expected to decline at a similar pace again. The Manufacturing Production data rose at a faster pace of 0.9% against 0.2% estimates.

Financial markets must be prepared for high volatility in the British currency next week, as key UK economic releases, such as employment data for three months ending July and the Consumer Price Index (CPI) data for August, are scheduled before the Bank of Englands (BoE) monetary policy announcement on Thursday.

Market participants expect the BoE to leave policy rates unchanged at 3.75%, but key economic data releases before the event could result in a dramatic shift in interest rate expectations.

UK inflation seen ticking higher in August on renewed price momentum

Economists at Deutsche Bank expect UK inflation to re-accelerate modestly into late summer, noting that “after broadly matching expectations in July, we see price momentum pushing up again in August.” They argue that “some goods inflation, food inflation and a chunky rise in energy prices will likely see inflation take another small step higher to round up the summer,” with headline CPI forecast to “push to 3.04% y-o-y.” At the same time, Deutsche Bank anticipates underlying pressures will continue to ease, projecting that “Core CPI, we think, will have edged lower to 2.53% y-o-y.”

On the US Dollar front, investors await the United States (US) Consumer Price Index (CPI) data for August, which will be published at 12:30 GMT.

The US CPI data is expected to have significant influence on Federal Reserves (Fed) monetary policy outlook.

Meanwhile, there has been a fresh increase in hawkish Fed expectations after the release of the hotter-than-expected US Producer Price Index (PPI) report of August on Thursday.

According to the CME FedWatch tool, the odds of the Fed raising interest rates at the policy meeting next week have increased to 72.4% from 61.2% seen before the data release.

In the daily chart, GBP/USD trades at 1.3512, holding just under the 20-day exponential moving average (EMA) at 1.3531, which keeps the near-term tone mildly bearish despite the pair consolidating near recent highs.

The Relative Strength Index (RSI) at 48 is neutral, hinting at a lack of strong directional momentum as price trades slightly below its short-term trend gauge.

On the upside, immediate support is suggested near the 20-day EMA at 1.3531, followed by the August 28 high near 1.3600. Looking down, the pair could extend its decline towards 1.3400 if it fails to hold the over-a-week low of 1.3475.

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

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.