Pound Sterling remains depressed as softer UK Q4 GDP print reaffirms BoE rate cut bets

POPULAR ARTICLES

The GBP/USD pair turns lower for the third straight day on Thursday and retreats further from a one-week high, around the 1.3715 region, touched the previous day.

GBP/USD attracts sellers for the third straight day as the USD looks to build on the post-NFP bounce.
The UK economy grew 0.1% in Q4 2025, reaffirming March BoE rate cut bets and undermining the GBP.
Traders now look to US Initial Jobless Claims for some impetus ahead of the US CPI report on Friday.

The GBP/USD pair turns lower for the third straight day on Thursday and retreats further from a one-week high, around the 1.3715 region, touched the previous day. Spot prices, however, hold above the 1.3600 mark through the early European session and move little following the release of rather unimpressive US macro data.

The UK Office for National Statistics reported that the economy expanded 0.1% in the three months to December 2025, missing forecasts for a reading of 0.2%. Moreover, the UK GDP rose 1.0% YoY in Q4 2025 vs. 1.2% expected. Separately, UK Industrial and Manufacturing Production, and Trade Balance data fell short of market estimates. This comes amid bets for an interest rate cut by the Bank of England (BoE) in March and keeps the British Pound (GBP) depressed.

Meanwhile, traders trimmed their bets that the US Federal Reserve (Fed) will lower borrowing costs in March following the release of the blowout US Nonfarm Payrolls (NFP) report on Wednesday. Adding to this, hawkish comments from a duo of influential FOMC members assist the US Dollar (USD) to build on the overnight bounce from a nearly two-week low, which contributes to the offered tone surrounding the GBP/USD pair and backs the case for deeper losses.

Market participants, however, are still pricing in the possibility of at least two 25 basis points (bps) Fed rate cuts in 2026. Apart from this, threats to the US central bank's independence, along with the underlying bullish sentiment, might cap any meaningful upside for the safe-haven Greenback. Traders now look forward to the release of the Weekly Initial Jobless Claims from the US to grab some short-term opportunities later during the North American session.

The focus, however, will remain glued to the latest US consumer inflation figures, due on Friday. The crucial data will play a key role in driving expectations about the Fed's rate-cut path, which, in turn, will drive the USD demand in the near-term and provide a fresh directional impetus to the GBP/USD pair.

(This story was corrected on February 12 at 10:15 GMT to say that the UK GDP rose 1.0% YoY in Q4 2025, not 1.3%.)

Economic Indicator

Gross Domestic Product (YoY)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The YoY reading compares economic activity in the reference quarter compared with the same quarter a year earlier. Generally speaking, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.