Major Economic Reports That Affect the British Pound

Economic

Summary:

Learn about the major economic reports that influence the British Pound, including GDP, inflation, unemployment, and trade data. Understand how these indicators impact forex trading decisions.

The British Pound (GBP) is one of the most widely traded currencies in the world. As a result, its value is influenced by a range of economic factors, including domestic economic data, geopolitical events, and monetary policy decisions. For forex traders, understanding the major economic reports that impact the British Pound is essential for making informed decisions.

Economic reports provide key insights into the health of the UK economy, and changes in these indicators can lead to significant fluctuations in the value of the British Pound. In this article, we’ll explore the key economic reports that affect the GBP, explain how they influence market sentiment, and highlight how forex traders can use this information to enhance their trading strategies.

1. Gross Domestic Product (GDP)

What is GDP?

Gross Domestic Product (GDP) is one of the most important indicators of a country’s economic health. It measures the total value of all goods and services produced in a country over a given period. GDP data is released quarterly and provides insight into the overall strength of the economy.

How GDP Affects the British Pound

A higher-than-expected GDP growth rate signals a strong economy, which can lead to an appreciation of the British Pound. Conversely, if GDP growth is weaker than expected, it can lead to a depreciation of the currency. For traders, GDP data helps gauge the overall health of the UK economy and can give an early indication of whether the Bank of England (BoE) might change its monetary policy, such as raising or lowering interest rates.

For example, strong GDP data could encourage the BoE to adopt a more hawkish stance, leading to a stronger pound. Conversely, weak GDP figures might prompt the central bank to implement measures to stimulate economic growth, potentially weakening the currency.

2. Inflation (Consumer Price Index - CPI)

What is CPI?

The Consumer Price Index (CPI) is the most widely used measure of inflation in the UK. It tracks the price changes in a basket of goods and services over time. A rising CPI indicates increasing inflation, while a falling CPI suggests lower inflation.

How CPI Affects the British Pound

Inflation plays a crucial role in shaping the BoE’s monetary policy. The Bank of England has an inflation target of 2%, and if inflation rises significantly above this level, the central bank may decide to raise interest rates to combat rising prices. Higher interest rates tend to attract foreign investment, leading to an appreciation of the British Pound.

Conversely, if inflation falls below the target, the BoE may consider cutting interest rates to stimulate the economy, which could result in a weaker pound. Traders closely monitor CPI data for signs of inflationary pressures and to assess whether the BoE might tighten or loosen its policy stance.

3. Unemployment Rate and Employment Data (Labour Market Report)

What is the Unemployment Rate?

The unemployment rate is the percentage of the workforce that is unemployed and actively seeking work. The Labour Market Report also includes data on employment levels, average earnings, and job vacancies, providing a more comprehensive picture of the labour market.

How Employment Data Affects the British Pound

The UK’s unemployment rate is a key indicator of economic health. A falling unemployment rate suggests that the economy is growing and businesses are hiring more workers. This can lead to higher consumer spending, which in turn boosts economic growth and the value of the British Pound.

On the other hand, rising unemployment signals economic weakness and may prompt the BoE to take action, such as lowering interest rates to stimulate job creation. Traders watch the unemployment data closely as it can influence expectations for future interest rate moves by the BoE.

For example, if employment figures show significant growth, the GBP could strengthen due to the expectation of stronger consumer spending and economic growth. However, higher unemployment could prompt concerns about the UK’s economic outlook, leading to a weaker pound.

4. Retail Sales

What are Retail Sales?

Retail sales data tracks the total sales of goods and services within the retail sector. This report is considered a good indicator of consumer spending and overall economic activity.

How Retail Sales Affect the British Pound

Retail sales are a key measure of consumer confidence and economic health. Strong retail sales suggest that consumers are confident in the economy, which can lead to a stronger British Pound as it signals robust domestic demand and potential GDP growth.

Weak retail sales, on the other hand, may signal declining consumer confidence or economic challenges, leading to a potential depreciation of the GBP. Traders pay attention to this data as it reflects the current state of the economy and can influence short-term market sentiment.

5. Trade Balance and Current Account Balance

What is the Trade Balance?

The trade balance is the difference between a country’s exports and imports of goods and services. A trade surplus occurs when exports exceed imports, while a trade deficit occurs when imports exceed exports. The current account balance includes the trade balance and other international income flows, such as investment income.

How the Trade Balance Affects the British Pound

A trade surplus tends to strengthen the British Pound because it reflects higher demand for the UK’s goods and services. Conversely, a trade deficit can weaken the pound as it suggests that the UK is importing more than it is exporting, which may lead to increased demand for foreign currencies to settle international transactions.

Traders watch the trade balance closely, as a large deficit can be a warning sign of economic instability or an unsustainable current account position, potentially weakening the pound.

6. Bank of England Interest Rate Decisions

What are Interest Rate Decisions?

The Bank of England sets interest rates as part of its monetary policy. Interest rates directly affect the cost of borrowing and lending in the economy, and they are a key tool for controlling inflation and stabilizing economic growth.

How Interest Rates Affect the British Pound

Interest rates have a major impact on the British Pound. A higher interest rate typically attracts foreign investors seeking better returns, which can lead to an increase in demand for the pound. Conversely, if the BoE lowers interest rates, it may make UK assets less attractive to foreign investors, leading to a weaker pound.

Forex traders closely follow BoE interest rate decisions and statements from the bank’s policymakers to assess the likely direction of the currency.

7. Brexit-Related News and Events

While not an economic report in the traditional sense, developments related to Brexit—such as trade deals, political negotiations, and policy changes—continue to play a significant role in the value of the British Pound. Any uncertainty or positive news related to Brexit can have a profound impact on GBP’s volatility.

Conclusion

The British Pound is influenced by a variety of economic reports that reflect the health and performance of the UK economy. From GDP and inflation data to employment figures and trade balances, these reports help traders gauge the overall economic climate and make informed decisions. Understanding how each of these reports affects the pound is crucial for forex traders looking to navigate the complexities of the currency markets.

By staying informed on these key economic indicators and their potential impact on the British Pound, traders can improve their ability to predict market movements and enhance their trading strategies.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Cryptocurrency

Bitcoin price is up 2.3% on Jan. 8, establishing a new three-week high of around $102,760.

Data from Cointelegraph Markets Pro and Coinbase shows that the BTC price rose from a low of $91,315 on Dec. 30, rising as much as 11.8% to trade at $101,942 at the time of publication. How High Can Bitcoin Price Go?_1

BTC/USD daily chart. Source: Cointelegraph/TradingView

This performance has seen BTC trade above $100,000 for the first time since Dec. 19, 2024, leaving market participants wondering how high Bitcoin’s price may go in the next few weeks or months.

Analysts set ambitious targets for Bitcoin price

Bitcoin’s latest recovery has led market analysts and traders to set varied BTC price targets based on various analyses and sentiments.

Bitcoin’s current bull cycle may continue toward $120,000, according to analyst WealthSquad Chris.

In a technical setup shared on his X handle, the analyst showed Bitcoin breaking out of consolidation toward the $100,000 mark.

If this barrier is broken, WealthSquad Chris projects $120,000 as the next likely upside target. How High Can Bitcoin Price Go?_2

BTC/USD daily price chart. Source: WealthSquad Chris

Multiple analysts have also projected higher year-end targets for Bitcoin, including crypto investor Mike Alfred, who says BTC price could potentially rise to $200,000, with further targets at $315,000, $500,000, and even $700,000 in this cycle.

“There is zero downside impulse in Bitcoin left,” Alfred said in a post on X, adding BTC could see a retracement to $95,000 or $96,000 before heading higher.

Daily Fibonaccis put BTC price at $450,000

Based on its historical performance and Fibonacci extensions, Bitcoin could also be on track to reach between $172,00–$450,000, according to crypto commentator MartyParty.

Based on its performance since the $5,000 level in mid-2019, the Bitcoin price has successfully surpassed all the extension levels, as shown in the chart below.

The price has now to overcome the 1.0 Fibonacci extension level at $107,500, which is the next target, before advancing toward higher extensions, such as 2.618 and beyond. How High Can Bitcoin Price Go?_3

BTC/USD daily chart. Source: MartyParty

The chart suggests that the highest milestone could be the 4.236 level, which is near $450,000, according to MartyParty.

Bitcoin bull flag places upside target above $175,000

From a technical perspective, the Bitcoin price action has led to the formation of a bull flag pattern in the weekly timeframe, a bullish setup that forms after the price consolidates inside a down-sloping range following a sharp price rise. How High Can Bitcoin Price Go?_4

BTC/USD weekly chart. Source: Cointelegraph/TradingView

Bull flags typically resolve after the price breaks above the upper trendline and rises by as much as the previous uptrend’s height. This puts the upper target for Bitcoin price at $175,700 — up 73% from the current price.

Additionally, Bitcoin’s daily relative strength index is positive at 69. This suggests that the market conditions still favored the upside, boosting BTC’s chances of reaching its bull flag target.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin experienced a notable resurgence on Monday, rising 4% to surpass the $100,000 threshold for the first time since 19 December.

The cryptocurrency market saw more than $900m (€867m) in spot Bitcoin exchange-traded fund (ETF) inflows on the same day, signalling renewed investor interest. Despite this, the sustainability of the rally remains uncertain, as institutional buying volumes were relatively low, according to data from Coinbase. By early Tuesday in the Asian session, Bitcoin had retreated slightly, trading at $101,670 (€97,900) as of 4:30 am CET.

Bitcoin's resurgence aligns with US dollar weakness

Bitcoin's surge coincided with a significant decline in the US dollar, which retreated sharply on Monday following a Washington Post's report that Trump will soften his tariff stance. The news initially caused the US dollar index to drop as much as over 1%, the biggest intraday decline since 2023, before cutting some losses.

This decline buoyed other assets, including global stock markets and Bitcoin. The euro also posted its largest single-day gain against the dollar in 14 months.

However, the US President-elect denied such a report on his Truth Social, which "incorrectly states that my tariff policy will be pared back", he said. The dollar pared some of its early gains and is expected to continue the uptrend ahead of Trump's inauguration later this month. A strengthening dollar may continue to exert pressure on Bitcoin and other currencies, with Bitcoin likely awaiting a fresh catalyst for its next major move.

Year-end decline amid profit-taking and Fed policy

Bitcoin peaked at more than $108,000 (€104,000) on 17 December, following a hawkish interest rate cut by the Federal Reserve. The Fed's Dot Plot projections indicated two 25 basis point cuts in 2025, a shift from the earlier forecast of a full-percentage point reduction.

By the end of 2024, Bitcoin had dropped approximately 16%, closing the year at just over $91,000 (€86,700). Profit-taking and subdued trading volumes during the holiday season contributed to the decline. Coinbase data revealed that Bitcoin trading volumes have been trending downward since the US election. Even with Monday's price rally, trading activity remained below the levels observed during the Fed's rate decision in December, suggesting waning optimism in the so-called Trump rally.

However, many analysts believe the world's largest cryptocurrency will extend its rally in 2025. "Bitcoin's and crypto's performance in 2024, if there was still any doubt, solidifies that it deserves a place within a diversified investment portfolio", said Josh Gibert, a market analyst at eToro Australia last week.

Investors eye a new surge after Trump's inauguration

Option markets saw mounting interest in the betting price above the $100,000 mark, with the $120,000 (€115,600) call with an expiry date of 28 March as the most popular option on Deribit. This may suggest that traders expect that the Trump Administration will impose pro-cryptocurrency regulations and push Bitcoin's price to a new high.

The President-elect's inauguration is scheduled for 20 January, and markets are anticipating moves to relax cryptocurrency regulations and advance his pledge to make the United States "the crypto capital of the planet". In December, Trump reiterated his plan to include Bitcoin as part of the US strategic reserves.

Source: Euronews

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The Dollar slumped on news President-elect Donald Trump was watering down his plans for universal tariffs, but it soon recovered some of that lost ground when Trump hit the airwaves to deny the rumours.

"The roller coaster ride begins and the USD seems to be one of the central focal points," says W. Brad Bechtel, Global Head of FX at Jefferies LLC, following indications Donald Trump has watered down his tariff ambitions.

The Washington Post reported President-elect Donald Trump is considering imposing tariffs on only critical imports from all countries.

"The current discussions centre on imposing tariffs only on certain sectors deemed critical to national or economic security," the newspaper reported.

"The story in the Washington Post, quoting so-called anonymous sources, which don’t exist, incorrectly states that my tariff policy will be pared back. That is wrong," Trump said in a rebuttal on Truth Social on Monday.

Trump campaigned for universal tariffs of between 10% and 20% on everything imported into the United States. The tariff on all goods from China would have been more significant.

News that the scope of the tariff might be restricted to 'critical' imports, suggests a shift in stance from Trump that will boost those assets most exposed to the universal tariff.

"A weaker USD gives global relief as it pushes back on intervention and holding rate policy to support FX elsewhere," says Bob Savage, Head of Markets Strategy at BNY.

The Dollar rallied in the wake of Trump's victory as markets saw universal tariffs being inflationary for the U.S. and a headwind to global growth. Dollar Pares Losses After Trump Hits Back Against Tariff Rumours_1

Dollar Pares Losses After Trump Hits Back Against Tariff Rumours_1

Market relief unwinds some of the USD's recent rally and puts the Greenback on the back foot at the start of the first full trading week of 2025.

The Pound to Dollar exchange rate reflected this with a 1.0% rally, reaching 1.2533, before Trump's response set it back to 1.2500.

"The USD is reacting to the news," Bechtel, "but I would take a huge grain of salt in trusting this sort of article as I am sure they way things actually play out on tariffs will be far different from what is discussed in this article."

Bechtel says he has a feeling this is how 2025 will go, with random headlines from 'sources familiar with the matter' that will likely be refuted directly by Trump as soon as he wakes up.

The latest developments in the tariff saga form part of a pettern in which Trump pushes his agenda by creating an environment of uncertainty, as this allows him to stay on the front foot.

To be sure, there will be many twists and turns in the coming weeks, but what this latest episode could do is draw a tentative line under recent GBP/USD downside pressures as universal tariffs - a key underpinning of the late-2024 USD rally - now have a big question mark.

Recent gains also left the USD richly valued and increasingly prone to a corrective move lower. However, in FX markets, a trigger is usually required to cause a correction.

This Tariff news is a perfect example of such a trigger. It does not turn the trend around, but it does open the door to a potentially decent pullback.

Source: Poundsterlinglive

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Economic

If the latest inflation data from Germany and Spain is anything to go by, investors betting the European Central Bank will cut rates by almost a percentage point in the first half of 2025 could be in for disappointment.

The euro zone's harmonised index of consumer prices (HICP) is due later today and expected to have risen 2.4% in December, speeding up from 2.2% in November.

Indicators already out show prices heating up with faster-than-expected pickups in inflation reported in Spain and Germany.

This week's prices data will be the last before the ECB's next meeting on Jan. 30. Any signs that inflation is easing further would give the ECB scope to loosen policy and support a struggling economy.

Energy could be a thorn in the ECB's side with natural gas prices at 14-month highs. Germany's faster-than-forecast inflation in December was due to a smaller drop in energy prices.

It's not going to be a repeat of 2022's surge, but prices look set to remain elevated with less gas in storage compared with recent years and the end of a decades-long deal for Russia to supply gas to Europe via Ukraine.

Morning Bid: Inflation Heats Up in the Euro Zone_1

A line chart comparing inflation metrics over the past five years.

Britain also faces a similar dilemma as wage growth adds to inflation pressures. British 30-year government bond yields came within a whisker of their highest level since 1998 on Monday.

Meanwhile, markets still believe U.S. President-elect Donald Trump's tariff agenda won't be as aggressive as feared. That's despite Trump denying a Washington Post story saying he will go soft.

Asian stocks extended the rally in European and world equities to Tuesday after U.S. stocks rose for a second day and the dollar fell against developed and emerging currencies alike.

Major bourses across Europe jumped on Monday, with France's CAC 40 up 2.2% and Germany's DAX1.5% higher. The auto sector surged nearly 3%, marking its best performance in over a year.

If U.S. tariffs are broadly lower than Trump promised on the campaign trail and aimed only at "critical" sectors, then the outlook for global growth should improve and the dollar should weaken.

Trump's denial kept Treasury yields elevated ahead of this week's debt auctions. The 30-year yield is the highest in over a year and closing in on 5.00%.

In other news, investors are watching the political drama in Canada following Prime Minister Justin Trudeau's announcement that he will step down.

Key developments that could influence markets on Tuesday:

Economic data: UK Halifax house prices, Italy CPI, France CPI, Euro zone HICP and unemployment rate, US ISM non-manufacturing PMI

Fed speakers: Federal Reserve Bank of Richmond President Thomas Barkin speaks in Raleigh

Debt auctions: Germany reopening of 2-year auction, United Kingdom reopening of 30-year auction

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Owen Li

Bond

The UK’s long-term borrowing costs surged to the highest level since 1998 as traders dumped debt ahead of a near record flood of bond sales this year.

The yield on 30-year gilts climbed three basis points to 5.21%, just ahead of a £2.25 billion (US$2.8 billion or RM12.69 billion) auction for notes of the same maturity on Tuesday.

The move ramps up the pressure on Chancellor of the Exchequer Rachel Reeves to keep the market on side ahead of a raft of bond sales. The Labour government’s plans to sell £297 billion of bonds this fiscal year — the second-highest on record — is keeping gilts under pressure, as investors worry about the outlook for the nation’s ballooning debt.

“Following a busy January, the burden of gilt issuance volume is unlikely to ease significantly, if at all, in cash or duration terms, for at least the remainder of the quarter,” Sam Hill, head of market insights at Lloyds Banking Group plc, wrote in a note.

The prospect of fewer interest-rate cuts from the Bank of England than initially expected has also weighed on the notes. Traders are betting the UK central bank will deliver only two quarter-point reductions this year, compared to bets on more than three at the start of last month.

The market moves show the extent to which the government is treading a fine line, as it tries to keep investors on side and dispel the memory of former Conservative Prime Minister Liz Truss’ disastrous mini-budget of 2022. Reeves already received a warning from bond vigilantes in October when yields surged in response to the prospect of bigger debt auctions.

Source: Theedgemarkets

Risk Warnings and Disclaimers

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Cohen

Forex

The Euro is receiving more support on Tuesday and extends its recovery against the US Dollar (USD) for the third day in a row, with expectations that the upcoming inflation numbers for the Eurozone as a whole will remain persistent. The expectations were revised after the preliminary German Harmonized Index of Consumer Prices (HICP) data for December, released on Monday, showed that the monthly headline HIPC inflation jumped by 0.7%, above the 0.5% estimate. On a yearly basis, headline HICP rose by 2.9%, compared to 2.4% in November.

Meanwhile, markets are on edge over the whipsaw reactions and knee-jerk moves over the tariff plans from President-elect Donald Trump's tariff plans. The Washington Post published a piece mentioning that Trump was considering simplifying his tariff schemes by imposing a single universal tariff on critical imports and goods. Hours later, Trump himself came out to refute the rumors and confirm that the schemes and plans would remain in place as earlier announced.

Daily digest market movers: French HICP upbeat confirmed

The French preliminary HICP for December has already been released earlier on Tuesday. The monthly gauge snapped the previous disinflationary print by jumping 0.2%, below the 0.4% expectation and above the -0.1% from November. The yearly gauge came in at 1.8%, which is 0.1% higher than the 1.7% from November. At 10:00 GMT, the preliminary Eurozone HICP for December will be released. The monthly headline HICP has no consensus view, while it was at -0.3% in November. The yearly headline HICP is expected to tick up to 2.4% from 2.2% in the previous month.The monthly core HICP has no forecast and was at -0.6% in November.The yearly core HICP is expected to remain unchanged at 2.7%.For now, the European Central Bank (ECB) is projected to cut its policy rate by 25 basis points on January 30. Italian inflation will also be released at 10:00 GMT. Here, a similar pattern is seen as in Germany, with the preliminary December monthly HICP heading to 0.3% from -0.1%.German Bunds ticked up quite a bit last week and stretched up to 2.47% on Monday. This Tuesday, rates are starting to ease, with the Bund currently trading around 2.44%.European equities are unhappy with the recent development in European inflation numbers and are dipping lower this Tuesday. The fear that inflation will pick up again could mean that the European Central Bank keeps rates steady for longer or considers starting to hike again, which is a setback for equities.

Technical Analysis: EUR/USD above ground at 1.04 with blurry outlook

EUR/USD is in a perfect technical bounce, though where to go next is becoming blurry. The geopolitical developments from Monday have helped the Euro find support at 1.0294 and rally all the way to nearly 1.0448. The question now will be whether the Euro has enough room left to head above 1.0450. This will not be the case if those European bonds start to fade from their Monday high points and need more upside to pull the Euro further up towards 1.05.

The first big level to break is 1.0448, the low of October 3, 2023. Once through that level, the 55-day Simple Moving Average (SMA) at 1.0558 comes into play. Another catalyst will be needed for this kind of move, as it could squeeze the Dollar bulls.

On the downside, ahead of the current two-year low at 1.0224, the 1.0294 level is now acting as the new first line of defence. It was a pivotal point on Monday, offering room for buyers in EUR/USD to get involved and push price action higher. Further down, the round level at 1.02 would mean a fresh two-year low. Breaking below that level would open up the room to head to parity, with 1.0100 as the last man standing before that magical 1.00 level.