UK GDP figures expected to show continued economic growth in Q3

• UK GDP growth is forecast to pick up in Q3. 
• Robust manufacturing activity is expected to underpin a further acceleration in Gross Domestic Product in the three months to September.
• Against the US Dollar, the Pound Sterling retains a positive near-term bias, with buyers targeting the 1.3500 area.

Growth of 0.7% in the three months to September is the market forecast for the United Kingdom’s (UK) preliminary third-quarter Gross Domestic Product (GDP) estimate, up from 0.5% in the second quarter of 2026. Due from the Office for National Statistics on Thursday, the release is the main event on this week’s UK economic calendar. The annual growth rate is expected to rise to 1.9%, compared with 1.4% in the previous month.

Industrial Production is forecast to have increased by 3% in the 12 months to September, up from 1.6% in August, making it one of the expected principal contributors to UK economic growth. Confirmation of that strength would create a favourable backdrop for the Bank of England (BoE) to continue the monetary tightening cycle it began last week.

UK GDP forecast points to stronger growth

Expectations for third-quarter economic growth have improved as recent UK macroeconomic releases have proved surprisingly resilient to the uncertainty surrounding the war in the Middle East and higher oil prices.

Manufacturing strength helped August’s monthly GDP figures exceed forecasts when released last month, with output expanding by  0.1% rather than contracting by the 0.1% markets had anticipated. A 0.8% increase in factory output during August largely offset stagnation in services and a 0.2% fall in construction output.

Further evidence of resilience came from the UK Manufacturing and Services Purchasing Managers’ Index (PMI) readings, which showed business activity still expanding in October. Unemployment, meanwhile, fell to its lowest rate since July last year. This broadly healthy macroeconomic backdrop has led the International Monetary Fund to lift its UK growth projection for 2026 from 1% to 1.3%.

A neutral UK budget has also helped sustain the favourable economic backdrop, easing concerns over the sizeable public debt, at least for the time being, and supporting the British Pound. Higher taxes on banks and gambling companies are expected to fund lower charges on food and energy bills. Despite concerns about their response, bond markets have registered no significant objection to the plans.

Against this backdrop, last week’s Bank of England rate rise means the third-quarter GDP report will face close scrutiny. Although economic growth is not a specific target within the BoE’s mandate, a healthy GDP reading would undoubtedly ease its rate-setting task while consumer inflation remains stubbornly high.

For the first time in three years, the BoE tightened monetary policy last week. Governor Bailey was among the policymakers who indicated that further rate increases might be necessary to return inflation to target. On Tuesday, Deputy Governor Clare Lombardelli took a stronger position, stating that she “would not rule out rate hike possibility in December”. A robust GDP figure on Thursday would lend support to those views and could encourage speculative buying of the Pound.

UK Q2 Gross Domestic Product release puts GBP/USD in focus

Thursday at 07:00 GMT is the scheduled release time for the UK’s preliminary Q2 GDP estimate. Moderate growth is anticipated for the three months to June. Risks for GBP/USD are tilted towards gains: a reading above expectations would increase the likelihood of another BoE rate rise, most likely in February.

Strong US inflation figures and hawkish remarks from Fed speakers drove broad US Dollar gains on Tuesday, triggering a sharp reversal in GBP/USD. At the time of writing, the pair is trading around 1.3320. Sellers have forced it beneath the lower boundary of the ascending channel in place since October. Momentum signals on the 4-hour chart have also shifted into bearish territory: the Relative Strength Index (14) is nearing oversold levels, while red bars on the Moving Average Convergence Divergence (MACD) histogram are widening. 

FXStreet FX Analyst Guillermo Alcalá offers this assessment: “Recent GBP/USD price action suggests that the corrective recovery from mid-October lows might have come to an end, and that the pair is ready to resume the broader bearish trend.”

Alcalá outlines the downside scenario as follows: “While below the channel bottom and the November 6 low, near 1.3340, bears are likely to be tempted to revisit the late October lows near 1.3270, with their gaze on the key resistance area near 1.3130,”

For an upward move, the requirement is clear in Alcalá’s view: “The pair would need to return above the broken trendline support, now around 1.3380, to ease bearish pressure, and shift the focus back towards the November 10 high near 1.3460 and the November peak, in the 1.3500 area.”