Following a decline in the previous period, the British economy experienced a rebound in November, dispelling concerns of a potential recession that arose with the October dip in economic activity. The recently released GDP report reveals a welcome monthly growth of 0.3%, aligning with the ongoing recovery observed in the purchasing manager index. This positive development is likely to be well-received by British policymakers.
In 2023, the 3-month average growth rate slipped into negative territory for the first time, following two consecutive months of stagnation. Industrial production fell by 0.1%, and manufacturing output increased less than anticipated, reaching 1.3% compared to the expected 1.7%.
Initially responding negatively to the report, the pound is currently trading slightly lower. The decline in GBP/USD and EUR/USD during the Asian session cannot be solely attributed to the GDP print. Global concerns are mounting, with the US and UK launching strikes against Houthi rebels in Yemen, prompting retaliatory actions from the Iran-backed militia. Additionally, China's economic performance continues to fall short of expectations, potentially impacting market sentiment and the British pound. Chinese exports experienced a 4.6% year-on-year decline, marking the first negative growth rate since 2016. Producer price inflation in China remained negative throughout 2023, constituting its longest streak of declines since 2009.
Despite reaching around $1.2785 in the Asian session, GBP/USD has trended lower to $1.2760. While the currency pair remains positive for the day and is poised for its seventh daily rise in eight days, sustained upward momentum would require a break above $1.28. Notably, the pound stands out as the top-performing G10 currency for the week, exhibiting strength against all other currencies in this category. The macroeconomic factors continue to drive the sterling's robust performance.
