Sterling steady after UK GDP data; Fed official up next

Sterling Holds Firm Following UK GDP Growth; Markets Eye Fed Official Comments

Market Reactions and Economic Data Overview

By Javi West Larrañaga

Sterling and Dollar Movements

Nov 12 (Reuters) - The pound was little changed against the dollar on Thursday, after UK economic growth data matched expectations and markets awaited comments from a key Federal Reserve policymaker.

Sterling was down 0.06% at $1.3271, but edged up to 83.57 pence per euro, near May 2025 highs.

The dollar, meanwhile, climbed to a 19-month high against a basket of major currencies.

UK GDP Growth and Bank of England Policy

Official data showed Britain's gross domestic product grew 0.7% in the third quarter, in line with expectations and the fastest pace in two and a half years.

The figures had little immediate impact on sterling but supported the Bank of England's decision last week to raise interest rates, said Kenneth Broux, FX and rates strategist at Societe Generale.

Expert Commentary

"The GDP numbers were good news ... they show you there's good momentum in AI roll-out and services in the UK economy, and that's helping growth forward," he said.

Interest Rate Outlook

The BoE raised rates for the first time in more than three years last Thursday and signalled at least one more increase was likely if the US-Iran conflict continues. Markets currently assign a roughly 75% chance of another rate hike in December.

"Whether there's a majority for that, we'll have to wait and see," Broux said. "It could very well be another split vote." 

Money markets are pricing in another three BoE rate increases by December 2027, with about a 50% chance of a fourth.

Focus on Federal Reserve Policy

Upcoming Fed Comments

Attention later in the day will be on comments from New York Fed President John Williams after hotter-than-expected US inflation data and hawkish comments from several Fed officials reinforced expectations for further tightening.

Rate Hike Expectations

Markets are overwhelmingly pricing in a 25-basis-point Fed rate increase in December, according to IRPR data, though investors remain divided over the outlook for January. A total of three Fed rate hikes are priced in by December 2027.

Reporting Credits

(Reporting by Javi West Larrañaga in Gdansk. Editing by Amanda Cooper and Mark Potter)