GBP loses ground to USD as labour market and GDP data next week could bring March rate cut into view
Sterling lost ground on the dollar for the third straight session on Thursday, despite a relatively barren domestic economic calendar.
With relief following November’s Autumn Budget now largely evaporated, the pound has instead found itself at the mercy of global news, and the GBP/USD exchange rate will trade mostly off the December US payrolls report on Friday. Barring any surprises here, we think that the pound could hug the 1.35 level for now, as markets weigh up the possibility of another Bank of England rate cut as soon as its March meeting.
A handful of critical economic data releases next week could be key in shaping expectations for MPC policy.
A miss in next Tuesday’s UK labour data, in particularly, would undoubtedly bring a March cut into closer view, which could heap some selling pressure onto the pound.
Next Thursday’s November GDP data runs on a bit of a lag, but it could give us a clearer idea as to whether Britain’s economy posted outright contraction in the final quarter of 2025 - which seems entirely plausible.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
