GBP/USD approaches 1.2500, weighed by gloomy UK data

• The Pound extends its reversal and hits lows near 1.2500
• UK GDP and Industrial production deteriorate beyond expectations.
• All eyes are now on the Fed, which might boost USD volatility later today.

The Sterling is giving away previous gains on Wednesday, as a string of downbeat UK macroeconomic releases have boosted concerns about the country’s economic outlook.

National Statistics data has revealed that the UK economy contracted at 0.3% in October, well beyond the -0.1% expected, and following a 0.2% growth in September.

Beyond that, manufacturing production dropped 1.1%, against market expectations of a flat performance, driving industrial output 0.8% down instead of the 0.1% decline forecasted by the experts.

Weak UK data poses a challenge to the BoE

These figures offset the positive impact after Tuesday’s strong employment report and pose a headache for the BoE ahead of Thursday’s monetary policy decision.

Later today, the Fed is expected to leave its benchmark rate unchanged at the 5.25% - 5.5% band. The market will be attentive to the dot plot and Chairman Powell’s comments about the bank’s next policy steps, which might boost USD volatility. 

Technical levels to watch