Q3 UK GDP is expected to point to continued economic growth

• Q3 UK GDP growth is forecast to accelerate. 
• Robust manufacturing activity is expected to lift Gross Domestic Product growth further in the three months to September.
• The 1.3500 area remains the target for Pound Sterling bulls as the currency retains a positive near-term trend against the US Dollar.

0.7% growth is expected in the three months to September. The preliminary third-quarter Gross Domestic Product (GDP) estimate, due from the Office for National Statistics on Thursday, is this week’s main economic release in the United Kingdom (UK). Markets anticipate an acceleration from 0.5% in the second quarter of 2026, alongside a rise in annual growth to 1.9% from 1.4% in the previous month.

Industrial Production is forecast to rise 3% in the 12 months to September, up from 1.6% in August. This strength is considered a key contributor to UK economic growth. Confirmation would create favourable conditions for the Bank of England (BoE) to prolong the monetary tightening cycle it began last week.

UK GDP forecast: Growth figures and their implications

Despite uncertainty surrounding the Middle East war and higher oil prices, recent UK macroeconomic releases have proved unexpectedly resilient. That performance has lifted market expectations for third-quarter growth.

Released last month, August’s monthly GDP figures exceeded forecasts, showing economic expansion of  0.1% rather than the 0.1% contraction markets had expected. Manufacturing provided the support: factory output rose 0.8% in August, largely compensating for stagnant services activity 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 indicated continued business expansion in October. Unemployment also fell to its lowest level since July last year. This broadly healthy macroeconomic backdrop prompted the International Monetary Fund to upgrade its UK growth forecast for 2026 from 1% to 1.3%.

A neutral UK budget has also supported the favourable economic backdrop and the British Pound. For now, it has eased concerns over the substantial public debt. Higher taxes on banks and gambling companies are expected to fund lower charges on food and energy bills, and the much-feared bond markets have registered no significant opposition to these proposals.

Against this backdrop, last week’s Bank of England rate increase gives the third-quarter GDP report particular significance. Although economic growth is not an explicit objective within the BoE’s mandate, a healthy GDP reading would undoubtedly simplify its rate-setting decisions while consumer inflation remains stubbornly high.

The BoE delivered its first monetary tightening in three years last week. Governor Bailey was among the policymakers signalling that further rate increases might be required to return inflation to target. On Tuesday, Deputy Governor Clare Lombardelli took that message further, stating that she “would not rule out rate hike possibility in December”. A robust GDP release on Thursday would reinforce those views and could encourage speculative buying of the Pound.

07:00 GMT Thursday: UK Q2 GDP release and GBP/USD implications

Thursday at 07:00 GMT is the scheduled release time for the UK’s preliminary Q2 GDP estimate. Moderate expansion is forecast for the three months to June. Risks for GBP/USD lean upwards: an above-forecast result would strengthen expectations of another BoE rate rise, most likely in February.

At the time of writing, GBP/USD is trading around 1.3320 after reversing sharply on Tuesday. Strong US inflation figures and hawkish remarks from Fed speakers had lifted the US Dollar broadly. Sellers have driven the pair 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 describes the outlook as follows: “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: “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 upside shift, Alcalá sets out this requirement: “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.”