The Pound Sterling is strong against most currencies, except for those from Australia and New Zealand (antipodeans), as we await the UK’s monthly GDP and factory data. On Wednesday, it rose with hopes for a 0.1% economic growth in November. Previously, the UK GDP dropped by 0.1% in both September and October. Manufacturing production is expected to increase by 0.5% month-on-month, while industrial production should remain stable. The upcoming GDP data will impact market expectations for the Bank of England’s interest rate decisions, with rates expected to reach neutral levels soon.

Pound Gains Against US Dollar

The Pound rose by 0.2%, trading around 1.3445 against the US Dollar during European hours. Meanwhile, the US Dollar Index dipped slightly to around 99.10. US CPI data showed inflation steady at 2.7% for overall and 2.6% for core inflation year-on-year. This supports the idea that the Federal Reserve will keep interest rates unchanged. Market watchers will also look at the US Producer Price Index data for October and November for more insights on inflation. Technical analysis shows that GBP/USD is trading close to the 20-day Exponential Moving Average. If it closes above this average, it may gain momentum, with resistance at the 50% Fibonacci retracement level of 1.3393. We are closely monitoring the UK’s November GDP figures set to be released tomorrow. The pound is showing strength in anticipation, with a consensus predicting a slight 0.1% growth, a desirable change after the contractions in September and October of 2025. This moment is critical, given that the market has already anticipated some positive news.

Options for Managing Short Term Risk

This scenario makes options on GBP/USD particularly appealing for managing short-term risk. A straddle or strangle can profit from significant market moves in either direction if the data surprises. As the Bank of England signals a gradual path to lower rates, a rally from a strong GDP number may be limited. In recent history, UK inflation decreased to 3.1% in the last quarter of 2025, down from over 4.5% earlier in the year. However, retail sales for November 2025 were flat, indicating that consumer spending is weak and could negatively impact GDP. This mixed data supports strategies that benefit from sharp moves, regardless of the direction. On the US side, the dollar’s strength is backed by a strong labor market, with a December 2025 non-farm payrolls report showing an increase of 195,000 jobs. Combined with steady US inflation, it suggests the Fed will likely maintain rates through the first quarter. The difference in policies between a cautious Bank of England and a patient Fed may limit any significant GBP/USD rally. The technical outlook shows the pair is stalled right at the 20-day moving average around 1.3440. We should keep an eye on the 1.3485 level; failing to break above it after a positive GDP report could provide a good opportunity to buy puts or short positions. Conversely, if the GDP data falls short, the pair might quickly test support back down at the 1.3393 level. Create your live VT Markets account and start trading now.

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