GBP/USD depreciates to near 1.2650 ahead of UK monthly GDP

GBP/USD continues to lose ground due to risk aversion amid US tariff threats.
US PPI provided support for the US Dollar as it jumped 0.4% MoM in November, the largest gain since June.
Traders await the UK’s key economic data due on Friday to gain fresh impetus into the nation's economic health.

Akhtar Faruqui FXStreet

GBP/USD holds losses for the third successive day, trading around 1.2660 during the Asian hours on Friday. The pair depreciates as the potential tariff threats from Trump’s administration have boosted the US Dollar (USD) across the board and created a headwind for the risk-sensitive British Pound (GBP).

Additionally, the release of the hotter-than-expected US Producer Price Index (PPI) report on Thursday provided support for the US Dollar and undermined the GBP/USD pair. The US PPI jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.

Traders await the US Federal Reserve (Fed) interest rate decision scheduled next week. Financial markets are now fully pricing in a 25 basis point rate cut on December 18, according to the CME FedWatch Tool.

Traders are expected to focus on the United Kingdom's (UK) monthly Gross Domestic Product (GDP) and October's factory data, set to be released on Friday. These figures will provide insights into the nation's economic health.

The downside risks of the Pound Sterling seem limited due to increased expectations that the Bank of England (BoE) will adopt a slower pace of policy easing compared to other central banks in Europe and North America.

Economic Indicator

Gross Domestic Product (MoM)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

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