Sterling dips against dollar after UK data

The British pound edged slightly lower against the dollar on Thursday before trimming some of its losses, after economic data showed that the UK economy grew more strongly than expected in November. However, the data had little impact on monetary policy expectations.

Market participants have priced in interest rate cuts by the Bank of England totaling around 40 basis points by next September.

UK gross domestic product recorded its fastest pace of growth since June, supported by Jaguar Land Rover returning to full production capacity following a cyberattack that had affected the carmaker and its supply chains.

Callum Pickering, Chief Economist at Peel Hunt, said: “Despite the positive surprise, it is important to note that the data are not strong by any means.”

He added: “Economic activity in the UK is, at best, lukewarm and volatile, and remains largely constrained by weak confidence in the policy decisions taken by the Labour government.”

The pound fell by 0.05% to $1.3443, after having been down about 0.10% before the data were released.

Meanwhile, the dollar rose as markets looked past concerns over the independence of the Federal Reserve and shifted their focus back toward economic data.

Andrew Wishart, an economist at Berenberg, said: “The broader picture still points to the UK economy having lost momentum since the summer.”

He added: “We expect this weak phase to persist into 2026 amid ongoing job losses and fiscal tightening,” noting that this backdrop could help bring inflation down and allow the Bank of England to cut interest rates more aggressively than markets currently expect.

Analysts said investors have begun to refocus on economic data after the support the pound had recently received from easing financial and political risks in the UK faded — factors that had bolstered the currency following Chancellor Rachel Reeves’ November budget announcement.

The next batch of UK consumer price inflation data is due to be released on January 21.

At the same time, the euro rose by 0.15% to 86.54 pence.

The release of China’s full-year 2025 trade data on Wednesday highlighted a sensitive issue for the UK — the risk of the British market being flooded with Chinese goods originally destined for the US market.

The data showed that Chinese goods exports to the UK rose by 7.8% year on year in 2025, while exports to the European Union increased by 8.4%.