The British pound extended its advance against the U.S. dollar for a third consecutive session, with GBP/USD trading near 1.3450 during Asian hours on Wednesday. The move reflects renewed confidence in the U.K. economy after stronger-than-expected labor market data signaled resilience despite recent growth headwinds.
Figures from the Office for National Statistics (ONS) showed that U.K. employment rose by 82,000 in the three months to November, a sharp turnaround from a 17,000 contraction in the prior period. The rebound helped stabilize the pound and offset concerns stemming from two consecutive monthly GDP contractions earlier in the autumn.
Technically, the pair is consolidating near its 20-day Exponential Moving Average at 1.3439, a level acting as a near-term pivot. Momentum indicators remain balanced, with the Relative Strength Index near 52, suggesting room for further gains if incoming data supports the currency.
GDP and CPI Data to Shape BoE Outlook
Investor attention is now centered on upcoming U.K. macroeconomic releases, particularly GDP and CPI figures, which will provide fresh insight into domestic demand and inflation pressures. Economists expect the economy to have expanded 0.1% in November, following contractions of 0.1% in both September and October.
Industrial data are also in focus. Manufacturing production is forecast to rise 0.5% month-on-month, while broader industrial output is expected to remain largely flat. Together, the figures will help markets assess whether the U.K. economy is stabilizing or merely pausing before further weakness.
These indicators carry direct implications for Bank of England policy. In its December meeting, the BoE reiterated that rate cuts would proceed gradually. Speaking in Singapore this week, policymaker Alan Taylor said interest rates could fall toward neutral levels as inflation pressures ease, potentially returning to target by mid-2026.
Key technical levels traders are monitoring include:
- 1.3393: 50% Fibonacci retracement, acting as near-term resistance
- 1.3485: 61.8% retracement, a break above may signal trend reversal
- 1.3006: Recent swing low anchoring the broader range
Dollar Softens as Fed Rate-Cut Bets Recede
During European trading hours, the pound gained around 0.2% against the dollar as the U.S. Dollar Index (DXY) eased to near 99.10, slightly below its monthly peak of 99.26. The greenback had strengthened earlier this week after U.S. inflation data reinforced expectations that the Federal Reserve will hold rates steady.
December’s U.S. CPI showed headline inflation at 2.7% year-on-year and core inflation at 2.6%, levels consistent with a cautious Fed stance. While President Donald Trump renewed calls for rate cuts, global central bank leaders—including officials from the ECB and BoE—publicly reaffirmed support for Fed Chair Jerome Powell, underscoring the importance of central bank independence.
Markets now await upcoming U.S. Producer Price Index (PPI) data for further clues on inflation trends and near-term dollar direction.
