Pound climbs on a weaker Dollar and a UK growth surprise

GBP/USD climbs through 1.3250 to its highest level since October 6.
54 of 63 economists polled now expect a BoE hike to 4.00% in November.
BoE Governor Bailey is in Bangkok on Friday, and UK inflation is due October 21.

Joshua Gibson FXStreet

A weaker Dollar gave GBP/USD the first part of its climb, and a run of UK news gave it the rest. The pair rose through 1.3250 to its highest since October 6, and its only real setback came on the US releases.

The UK economy grew 0.1% in August against a forecast 0.1% contraction, with factory output up 1.2% where a 0.1% fall was forecast, and GBP/USD barely moved on the release. It has climbed since while EUR/USD has been nearly flat, which makes that part of the gain the Pound's own and has taken EUR/GBP back below 0.8450.

Of 63 economists polled October 12-14, 54 now expect the Bank of England (BoE) to lift the UK's Bank Rate to 4.00% in November. A month earlier, about nine in ten expected no move for the rest of 2026. A hike would put the UK back level with the top of the Fed's 3.75%-4.00% range and erase the gap the Fed's September 16 hike opened in the Dollar's favour.

On the calendar

BoE Governor Bailey speaks in Bangkok at 02:00 GMT on Friday, with Fed Chair Warsh following there at 03:30 GMT in his last scheduled appearance before the Fed's October 28 decision. A BoE hike on November 5 is almost fully priced, and traders put the Fed's next hike in December.

UK jobs figures are due at 06:00 GMT on Tuesday, October 20, after a 4.9% unemployment rate in the last release. September inflation follows at 06:00 GMT on Wednesday, October 21, after 3.1% in August. Retail sales at 06:00 GMT and the business surveys at 08:30 GMT come on Friday, October 23, all before the BoE's November 5 decision.

On the charts

Thursday's bar runs from near the bottom of the 1.3200-1.3300 range GBP/USD has held since September 24 to near its top. Wednesday's 11-month low just under 1.3150 is the deepest point of the slide from just under 1.3700 on August 21, and Thursday's high has made back roughly a quarter of it. The 50-day Exponential Moving Average (EMA) is near 1.3350, above the whole range.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

AUD/USD trims losses, still near 0.6900

AUD/USD remains well on the defensive, adding to Wednesday’s pullback and trading close to the key 0.6900 contention zone ahead of the opening bell in Asia. Discouraging prints from the Australian labour market report have weighed on the Aussie, which has remained unable to take advantage from the marked pullback in the Greenback.

USD/JPY slides back below 158.00 as USD reverses post-CPI gains

USD/JPY extends the previous day's pullback from a three-week high, attracting follow-through selling and sliding below 158.00 during Thursday's Asian session. Traders remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. The US Dollar, meanwhile, reverses Wednesday's hot CPI-led gains to April 2025 highs as US bond yields retreat on China bond-buying talk, further pressuring the pair.

Gold: Upside remains capped by $4,200

Gold regains the smile and leaves behind three consecutive days of losses, advancing to the $4,170 region per troy ounce on Thursday. The precious metal’s recovery comes amid the fresh offered stance in the Greenback and declining US Treasury yields while investors remain cautious ahead of the Fed’s Warsh speech on Friday.

Bitcoin rebounds to $82,000 as PPI hits 6.3%, nearly $1B liquidated

Bitcoin (BTC) recovered near $82,000 on Thursday after briefly falling below $80,000, paring losses triggered by hotter-than-expected US inflation data. September PPI inflation rose 6.3% YoY, exceeding forecasts of 5.3% and marking its second-highest level since November 2022. Core PPI inflation climbed to 5% annually, above expectations of 4.4%.

The Iran war will eventually end. Tariffs won't. Here's the problem

Two cost shocks are in the September Consumer Price Index (CPI), and they have different half-lives. Energy is up 20.4% on the year and accounts for about 1.3 points of the 3.7% headline, and that shock reverses when Oil does: Brent was back at its pre-war price on July 1 and above $100 again by the end of the month, after the ceasefire collapsed on July 8.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.