UK Economy Stages Modest Recovery, Sterling Fundamentals See Marginal Improvement

Summary:

The UK’s GDP grew by 0.3% MoM in November, beating expectations, with the service sector leading the gains. The GDP growth has reduced the likelihood of an interest rate cut by the Bank of England (BoE) next month.

BUY GBPUSD

Close Time

CLOSED

1.34231

Entry Price

1.37870

1.32400

1.35138 +0.00237 +0.18%

108.2

Pips

Profit

1.32400

1.35313

Exit Price

1.34231

Entry Price

1.37870

Fundamentals

The UK’s economic output in November exceeded expectations, providing a modest boost to the growth outlook at the end of the year. GDP rose 0.3% MoM, higher than the previously expected flat reading, with the service and manufacturing sectors registering the strongest growth.

Service sector output increased by 0.3% MoM, and manufacturing output climbed 1.1% MoM, offsetting a sharp 1.3% MoM decline in construction activity. Data shows that despite the ongoing slump in the construction sector, growth momentum in consumer and business-oriented industries is improving.

In the three months to November, GDP edged up 0.1%. The service sector grew by 0.2%, while manufacturing output slipped 0.1%, mainly dragged down by weakness in the automotive manufacturing industry. Construction output also fell by 1.1%. On a YoY basis, GDP expanded by 1.3%, driven by a 1.4% growth in the service sector. Manufacturing output rose 0.4% YoY, and construction output grew 0.7% YoY.

Market Watch: The return of UK economic growth in November has lowered the probability of a rate cut by the BoE in February. The 0.3% MoM GDP growth in November has given sufficient confidence to monetary policy committee members who still worry about inflation to hold off on voting for accommodative policies amid the current economic conditions. Current data indicates that the UK economy achieved modest growth in Q4 2025. The easing of uncertainty following the budget announcement may have underpinned December’s growth. However, the return to economic growth may not trigger a sustained recovery. Despite the boost from falling inflation, weak consumer spending and rising tax burdens may translate into more sluggish economic growth in 2026.

UK Economy Stages Modest Recovery, Sterling Fundamentals See Marginal Improvement_1

Technical Analysis

GBPUSD held above the 1.3400 level during the European trading session on Thursday, having earlier surged to near 1.3450. The currency pair staged a rally buoyed by upbeat UK economic growth and industrial data, but the upward momentum failed to sustain amid broad-based US dollar strength.

At present, market focus remains glued to fluctuations in the counterpart currency (the US dollar) for further guidance. Although Trump stated that Iran’s "killing spree" has stopped, which may signal a pause in military action against Iran, many of Trump’s policies are moving forward in terms of implementation. Should the US press ahead with strikes against Iran, it would trigger sharp volatility in the US dollar.

GBPUSD is currently stuck in a range-bound trading pattern, with the intraday trend remaining neutral. On the upside, a breakout above 1.3567 may extend the uptrend from the 1.3008 level, with the next target set at the 1.3787 high.

On the downside, a break below 1.3389 could prolong the downtrend from 1.3567. A sustained breach of the MA55 (currently at 1.3375) would signal that the current decline is another leg down in the correction from the 1.3787 peak. In this scenario, GBPUSD may drift further lower toward the 1.3008 support level.

Trade Recommendations

Trade Direction: Buy

Entry Price: 1.3389

Target Price: 1.3787

Stop Loss: 1.3240

Valid Until: 12, February, 2026, 23:55:00

Support: 1.3389/1.3323/1.3249

Resistance Levels: 1.3495/1.3533/1.3569

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