Sterling rallies as UK economic output exceeds forecasts with 1.4% annual growth in Q4 2024
Bank of England policymakers emphasize gradual approach to monetary easing despite positive data
Geopolitical developments and usdt vs usdcUS inflation data create mixed influences on currency markets
The British Pound (GBP) continues its upward trajectory during Thursday's European trading session, buoyed by multiple supportive factors including encouraging economic indicators from the United Kingdom and a generally optimistic market environment. Recent data from the UK Office for National Statistics revealed that the nation's economic performance surpassed expectations during the final quarter of 2024.
Quarterly economic expansion of 0.1% defied projections of contraction, while monthly growth accelerated to 0.4% in December compared to both forecasts and previous readings of 0.1%. These figures suggest the UK economy demonstrated unexpected resilience during the typically challenging winter period.
However, analysts caution that the positive GDP readings may not translate into sustained currency strength. The Bank of England recently revised its annual growth projections downward to 0.75% during its latest policy meeting, where policymakers implemented a modest 25 basis point reduction in borrowing costs while emphasizing continued vigilance regarding inflationary pressures.
BoE Chief Economist Huw Pill reiterated the central bank's cautious stance during recent remarks, noting that while some monetary policy restrictions could be relaxed due to progress in controlling inflation, the battle against price stability concerns remains ongoing. "Our approach to further easing must remain measured," Pill stated, emphasizing that aggressive rate reductions remain inappropriate given current economic conditions.
Supporting the positive economic narrative, UK manufacturing data also exceeded expectations. Industrial Production expanded by 0.5% month-over-month in December, outpacing the anticipated 0.2% growth. The manufacturing sector showed particular strength with 0.7% growth, reversing November's contraction and surprising analysts who had predicted a 0.1% decline.
Market dynamics: Sterling approaches key psychological level
The GBP/USD pair approaches the significant 1.2500 threshold as improved risk sentiment counterbalances concerns about persistent US inflation. Geopolitical developments suggesting potential progress in Russia-Ukraine negotiations have contributed to reduced demand for safe-haven assets, including the US Dollar.
Recent US inflation data revealed unexpected acceleration, with annual CPI reaching 3% in January compared to December's 2.9%. Core inflation measures also demonstrated stubbornness, rising to 3.3% from the previous 3.2%. These developments have led market participants to reassess expectations regarding the timing of potential Federal Reserve rate adjustments.
Market attention now turns to upcoming US economic releases and potential trade policy announcements. The Producer Price Index data scheduled for release later today could provide additional insights into inflationary trends, while potential tariff announcements may reintroduce volatility to currency markets.
Technical perspective: Sterling tests important moving average
The Pound's recent advance brings it to test the 50-day Exponential Moving Average, a key technical indicator watched by traders. A sustained break above this level could signal shifting momentum for the currency pair, though the Relative Strength Index suggests markets remain in consolidation mode rather than establishing a clear directional trend.
From a technical standpoint, the January low near 1.2100 continues to serve as important support, while the December peak around 1.2607 represents the next significant resistance level for the GBP/USD pair. Market participants will closely monitor whether the current upward momentum can overcome these technical barriers in the coming sessions.