Sterling Surges as UK Economy Beats Expectations

by with No Comment Market updates

On Thursday, the British pound jumped after fresh data showed the UK economy unexpectedly grew in the final quarter of 2024. The GBP/USD pair climbed 0.57% to 1.2515, reaching its highest level in over a week. This boost came after the UK’s GDP expanded by 0.1% in Q4, defying forecasts of a 0.1% contraction.

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Why the pound is rallying

The upbeat GDP data surprised markets, showing the UK economy grew at an annual rate of 1.4%, surpassing the expected 1.1%. The positive numbers helped ease recession fears and lifted investor sentiment toward the pound. Meanwhile, a broader shift in risk appetite further pressured the U.S. dollar, helping GBP/USD push higher.

Market outlook

The pound’s strength will depend on whether the UK economy maintains growth momentum and how global risk sentiment evolves. With ongoing trade policy uncertainty from the U.S. and geopolitical tensions in focus, volatility in forex markets is likely to continue.

Pound Drops to Lowest Level in Over a Year

by with No Comment Market updates

The British pound fell for the third day in a row on Thursday, hitting $1.2239—its lowest in over a year. This drop came alongside a 1.1% fall in the FTSE 250 Index and a sharp rise in UK government bond yields to 4.92%. The market turbulence is being fueled by concerns about inflation and renewed threats of tariffs from Donald Trump.

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Growing worries about UK finances

Investors are increasingly uneasy about the UK’s fiscal outlook. Rising borrowing costs are adding pressure on Chancellor Rachel Reeves, with the government’s fiscal headroom shrinking to just £9.9 billion. Comparisons to the instability after Liz Truss’ 2022 mini-budget are resurfacing, with the nation’s growing debt burden becoming a key concern.

Capital flight weighs on the pound

Higher interest rates usually boost a currency, but the pound’s drop suggests investors are pulling money out of UK assets. Traders are hedging against further declines, with sentiment toward the pound the most bearish in two years. As inflation worries and market uncertainty persist, the pound’s future looks volatile, leaving traders on edge about what comes next.