The UK will release its October GDP and Industrial Production data. The Office for National Statistics is expected to announce a 0.1% GDP growth, rebounding from the previous month’s contraction.
Industrial Production is projected to rise by 0.7% after September’s 2% decline. Annual Industrial Production, however, might fall by 1.2%, following a previous drop of 2.5%.
Gbp in Bullish Territory
The GBP/USD remains in bullish territory, peaking at a resistance of 1.3400. The Federal Reserve’s interest rate cut has increased risk appetite, pushing the USD lower.
Fed Chair Jerome Powell noted that further rate adjustments are unlikely until 2026, with just two more cuts anticipated in the next two years. Market players speculate on a faster rate cut pace next year.
Pound Sterling rallied by over 0.68% after the Fed’s 25-basis-point cut and weaker jobs report strained the USD. GBP/USD reached 1.3417, the highest in six weeks.
US Initial Jobless Claims increased to 236K, up from 192K. Continuing Claims fell from 1.937 million to 1.838 million. These figures are provided by the Department of Labor.
Federal Reserve Policy
The Federal Reserve’s recent interest rate cut is fueling broad market optimism and weakening the US dollar. While the Fed signals a pause for 2026, we are seeing the market price in a more aggressive easing cycle through next year. This divergence is currently the main driver for currency movements.
Recent data supports this view, with the latest Consumer Price Index (CPI) report showing inflation has eased to 3.1% year-over-year, giving the Fed more room to cut. At the same time, initial jobless claims have ticked up to 236,000, suggesting some softening in the labor market. This combination reinforces the bearish case for the dollar.
Despite the pound’s rally to a six-week high above 1.3400, its strength is built on a shaky foundation. The UK economy unexpectedly contracted by 0.1% in October, missing the forecast for slight growth. This negative surprise raises questions about the sustainability of the pound’s current upward momentum.
Looking deeper, we see that UK GDP has been largely flat over the last year, with recent ONS figures showing growth of only 0.2% in the third quarter of 2025. The Bank of England has also maintained a hawkish stance, holding rates steady to combat persistent core inflation, which remains above its 2% target. This policy divergence with the Fed could limit how high the pound can go.
Given these conflicting signals, we expect heightened volatility in GBP/USD in the coming weeks. The rally driven by US dollar weakness may face significant headwinds from the UK’s poor economic data. Traders might consider options strategies that profit from large price swings rather than betting on a single direction.
We saw a similar dynamic play out in the years following the 2008 financial crisis, where aggressive Fed easing pushed the dollar down but UK-specific economic woes capped the pound’s gains. That period was defined by sharp reversals and choppy trading within a broad range. This historical precedent suggests caution is warranted for anyone holding a strong directional view right now.
