Pound Squanders Good GDP News, Now Lower Against Euro and Dollar

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We're seeing a decent drawdown in pound Sterling.

The British pound has fallen across the board as it squanders those initial gains it enjoyed following the release of consensus-beating UK GDP data.

Typically, one would expect a currency to rise in response to a positive surprise in meaningful data: It was reported UK GDP GDP rose 0.2% m/m in November as the economy recovered from October's -0.1%, and in the process it exceeded the consensus forecast of 0.1%.

Yet, by the start of the New York trading session, the pound is lower against all G10 peers:

Above: GBP's daily performance at the opening of New York markets.

The pound to euro exchange rate has fallen from the day's high at 1.1552 to 1.1522 and the pound to dollar exchange rate from 1.3446 to 1.3372.

Screening the markets shows there's nothing untoward going on in the bond markets, where we would go looking for signs of stress about the UK's fiscal dynamics.

The move looks to be order-driven, i.e. there's some underlying selling pressures by certain real-money entities that in turn triggered follow-on trades by speculators who will have already benefited from the pound's recent recovery.

In short, there's no smoking gun here and we would imagine the dip is bought.

The economic growth figure certainly didn't offer a reason to sell the pound, and if anything, they justified an extension to the recent recovery

"The pickup in UK growth has taken the market by surprise," says Kathleen Brooks, Research Director at XTB. "The pound has reversed some of its decline on the back of this data and GBP/USD may test $1.3450 later this morning if the upside momentum continues."

The ONS says the 0.3% advance in monthly GDP helped the economy achieve growth of 0.1% in the three months to November 2025. Services added +0.2% in the three months, while production (-0.1%) and construction (-1.1%) were drags.

The pound's initial reactionary rise is what we would expect from a handsome beat on expectations, and this sets the currency in good stead for the coming days and the run-up to next week's labour and inflation data.

Next week's figures will be of greater significance to the currency market, given they are closely watched by the Bank of England, which will meet in February to discuss whether or not to lower interest rates again. This looming data also argues for the unusual weakness seen this Thursday to be shallow.

On these GDP data alone, the answer would be that it might be prudent to wait. At its most recent meeting in December, the Bank of England communicated a cautious approach to further interest rate cuts in the coming months.

The Bank remains concerned that inflation is anchored well above its 2.0% target, and further interest rate reductions risk inflaming that situation.

An economy that continues to register growth, albeit unimpressive growth, will not prompt a shift in stance at the Bank.

Money markets have recently reduced bets for the scale of UK rate cuts in 2026, which supports UK bond yields and mechanically lifts the pound.

Above: The return of production at Jaguar Landrover will boost manufacturing output. Image © Adobe Images

A significant development highlighted by today's data is the recovery in UK manufacturing in November, driven largely by a resumption in production at Jaguar Land Rover.

The company's UK works were shuttered in August due to a cyber attack and the resumption of production helped lift the car production component of these GDP data by a massive 25%.

So this offers a sizeable mechanical boost to the figures that risks flattering today's solid headlines.

The outlook certainly suggests the UK is not on the cusp of a new economic renaissance, with recent survey data showing subdued sentiment and conditions.