In November, the output of the UK services sector increased, but the absence of growth over a three-month period led to a 0.2% contraction during that time.
On Friday, the UK economy took center stage, as investors closely monitored the November GDP, industrial, and manufacturing production data.
Following a 0.3% contraction in October, the UK economy rebounded with a 0.3% expansion in November. Nonetheless, the average 3-month GDP displayed a 0.2% contraction, signaling a stall in economic growth in the three months leading up to October. Economists had predicted a 0.2% expansion in November and a 0.1% contraction in the three months to November.
According to the Office for National Statistics:
The larger-than-anticipated three-month average downturn might prompt the Bank of England to initiate talks about reducing interest rates. However, the improving conditions in the UK service sector could also be taken into account. Nevertheless, the absence of service sector growth over the past three months creates uncertainty regarding the UK's economic prospects.
Ahead of the UK data release, the GBP/USD initially dropped to $1.27493 and then climbed to $1.27844. Subsequently, in reaction to the UK GDP figures, the GBP/USD reached a peak of $1.27767 before declining to a low of $1.27630. By the end of Friday, the GBP/USD was up by 0.03% at $1.27642.
120124 GBPUSD 3 Minute Chart
The upcoming release of US producer prices for December is expected to attract significant investor attention. Following the higher-than-anticipated US CPI report, a substantial increase in producer prices could challenge expectations of a Federal Reserve rate cut in March, as producer prices typically foreshadow consumer price inflation.
Economists are predicting a 0.1% increase in both producer prices and core producer prices, with both indicators having stalled in November.
As inflation remains a focal point, the remarks from FOMC member Neel Kashkari on Friday will also require consideration. The market's response to the inflation data is likely to be closely monitored by investors.
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