UK GDP (November), Pound Sterling Analysis

• UK GDP shows signs of potential via latest November data
• GBP little changed but holds gains heading into the weekend
• UK and US conduct joint strike of Houthi military targets in Yemen
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

UK GDP Shows Signs of Potential via Latest November Data

UK GDP rose more than expected in November 2023, mainly boosted by the services sector and marginal improvements in production output. However, the main concern is around how the economy fared over the final quarter of the year and whether seasonally higher spending over the festive season was enough to see the UK avoid a technical recession. Q3 GDP contracted by a meagre 0.1% while Q2 came in flat.

The longer-term picture reveals massive challenges to growth – something the Chancellor of the Exchequer Jeremy Hunt sought to address in his Autumn Statement last year. The UK economy has struggled to grow at its pre-Covid pace, with growth petering out in 2022 and 2023 it would appear.

Source: The Office for National Statistics (ONS), prepared by Richard Snow

Pound Sterling Little Changed but Holds Recent Gains Heading into the Weekend

The pound was little changed against the US dollar but rose slightly on the back of the data. GBP/USD has climbed higher this week but still appears to be lacking the necessary momentum that would see the pair retest the late December swing high.

However, the golden cross and near-term direction suggests it may simply be a question of time. Constrained USD upside has helped cable grind higher – something that was evident after the higher US inflation print yesterday that failed to result in a sustained move higher for the greenback. Next week it’s the UK’s turn to release inflation data for December alongside jobs data for October (Employment change) and November (Unemployment rate).

GBP/USD Daily Chart

Source: TradingView, prepared by Richard Snow

UK Gilt yields dropped after the data release as bond market participants played down the significance of the month on month beat. UK interest rate expectations had initially held off on large rate cuts in 2024 but has more recently approached that aggressive estimates seen in the US and EU.

UK 2-Year GILT Yield (5-Min Chart)

Source: TradingView, prepared by Richard Snow

In other news the UK and the US conducted a joint strike against Houthi military targets in response to attacks on ships in the red sea, elevating the possibility of a geopolitical relevance in sterling but for now that appears contained.

https://www.dailyfx.com/news/pound-sterling-latest-uk-gdp-rose-in-november-but-remains-lacklustre-20240112.html