The British Pound Has Bottomed Out and Rebounded, Can the Appreciation Continue?
2025-02-17
■ The weakening of the US dollar mainly drives the current strength of the pound, and the formulation of the US reciprocal tariff policy remains to be seen
■ The UK's economic recovery is weak, with a focus on employment and inflation data, and the pound trend may be suppressed by the 200-day moving average.
On the 13th, the UK National Statistics Office announced that the real GDP (preliminary value) from October to December last year increased by 0.1% month-on-month, contrary to market expectations (a decrease of 0.1% month-on-month), achieving growth. From the specific data, government spending increased by 0.8% month-on-month, mainly reflecting the increase in administrative and defense spending and the growth of insurance activities. However, personal consumption, which accounts for 60% of GDP, remained flat month-on-month, dragged down by the decline in education spending. Corporate investment in total fixed capital formation fell by 3.2% month-on-month, and exports fell by 2.5% month-on-month. The decline in fuel, machinery, and transportation equipment became a drag factor, and corporate investment and exports have decreased for three consecutive quarters. Although real GDP returned to positive growth after two quarters, the UK economy still lacks strong momentum.
The rise in the pound exchange rate that day was more due to the weakening of the US dollar than to the improvement in British economic data. Although former US President Trump has signed a presidential order to impose reciprocal tariffs on all countries, it has not yet taken effect immediately, and the pressure on the appreciation of the US dollar has temporarily eased. It is expected that specific policy formulation will still take weeks to months. Raymondo, the nominated US Secretary of Commerce, said that the plan can be launched as early as April 2. As a result, GBP/USD rose above $1.25, hitting a new high since January 7; GBP/JPY briefly rose to the 193-yen range but then fell back to the 191-yen range due to the decline in USD/JPY. In
In the short term, the market is paying attention to the employment data and consumer price index (CPI) to be released by the UK next week. In the three months ending November last year, the unemployment rate rose to 4.4%, but the average wage in the private sector (3-month average) increased by 6.0% year-on-year, and the growth rate accelerated. At the same time, the year-on-year growth rate of CPI slowed down in December last year, with the composite index rising by 2.5% and the core CPI excluding factors such as energy, food, and alcohol rising by 3.2%. The Bank of England is expected to keep interest rates unchanged at its March meeting, and the market generally expects that there may be further interest rate cuts in May. The market's expectations may intensify for an early rate cut if the employment and price data released next week are lower than expected, thereby weakening the momentum of the pound's continued appreciation. It is currently expected that the upward resistance of GBP/USD and GBP/JPY will be at the 200-day moving average (US$1.2787 and JPY195.17, data as of the 14th).
■ The UK's economic recovery is weak, with a focus on employment and inflation data, and the pound trend may be suppressed by the 200-day moving average.
On the 13th, the UK National Statistics Office announced that the real GDP (preliminary value) from October to December last year increased by 0.1% month-on-month, contrary to market expectations (a decrease of 0.1% month-on-month), achieving growth. From the specific data, government spending increased by 0.8% month-on-month, mainly reflecting the increase in administrative and defense spending and the growth of insurance activities. However, personal consumption, which accounts for 60% of GDP, remained flat month-on-month, dragged down by the decline in education spending. Corporate investment in total fixed capital formation fell by 3.2% month-on-month, and exports fell by 2.5% month-on-month. The decline in fuel, machinery, and transportation equipment became a drag factor, and corporate investment and exports have decreased for three consecutive quarters. Although real GDP returned to positive growth after two quarters, the UK economy still lacks strong momentum.
The rise in the pound exchange rate that day was more due to the weakening of the US dollar than to the improvement in British economic data. Although former US President Trump has signed a presidential order to impose reciprocal tariffs on all countries, it has not yet taken effect immediately, and the pressure on the appreciation of the US dollar has temporarily eased. It is expected that specific policy formulation will still take weeks to months. Raymondo, the nominated US Secretary of Commerce, said that the plan can be launched as early as April 2. As a result, GBP/USD rose above $1.25, hitting a new high since January 7; GBP/JPY briefly rose to the 193-yen range but then fell back to the 191-yen range due to the decline in USD/JPY. In
In the short term, the market is paying attention to the employment data and consumer price index (CPI) to be released by the UK next week. In the three months ending November last year, the unemployment rate rose to 4.4%, but the average wage in the private sector (3-month average) increased by 6.0% year-on-year, and the growth rate accelerated. At the same time, the year-on-year growth rate of CPI slowed down in December last year, with the composite index rising by 2.5% and the core CPI excluding factors such as energy, food, and alcohol rising by 3.2%. The Bank of England is expected to keep interest rates unchanged at its March meeting, and the market generally expects that there may be further interest rate cuts in May. The market's expectations may intensify for an early rate cut if the employment and price data released next week are lower than expected, thereby weakening the momentum of the pound's continued appreciation. It is currently expected that the upward resistance of GBP/USD and GBP/JPY will be at the 200-day moving average (US$1.2787 and JPY195.17, data as of the 14th).