FX.co ★ Sterling Under Pressure Amid Disappointing UK Data

The British pound remained steady at approximately $1.31, close to its lowest level in seven months, and also reached a two-and-a-half-year low against the euro. This decline followed the release of economic data that fell below expectations, prompting speculation about a potential interest rate reduction by the Bank of England next month. This situation has also increased pressure on Treasury Chief Rachel Reeves in the lead-up to the November 26 budget announcement. The UK economy expanded by a mere 0.1% on a quarterly basis in the third quarter, slowing from 0.3% in the second quarter and falling short of the predicted 0.2% growth. Meanwhile, GDP for September contracted by 0.1% compared to the previous month, defying the anticipated growth of 0.1%. Further exacerbating market concerns, prior data revealed that the unemployment rate had reached its highest point in four years, and wage growth had decelerated to its slowest pace since early 2022. Investor confidence was further shaken by reports of a failed effort to challenge Prime Minister Keir Starmer's leadership. Allies cautioned that any such leadership contest could lead to market volatility and possibly increase gilt yields, all just two weeks ahead of the budget presentation.