British pound ignores key statistics

[Ben Graham]

The British pound completely ignored important data showing that national economic growth in the fourth quarter came in below forecasts. This occurred because business investment contracted and the services sector stagnated, which increased pressure on Prime Minister Keir Starmer.

According to the Office for National Statistics, UK gross domestic product rose by 0.1%. That followed 0.1% growth in the third quarter and was below the median economist forecast of 0.2%. In December, the economy also expanded by just 0.1%.

Weak GDP growth reflects the difficulties the United Kingdom faces in sustaining economic momentum amid global uncertainty. The year-end period proved particularly challenging. Tax increases introduced by the government likely weighed on consumer spending and investment activity. Trade tensions initiated by the United States created additional barriers for British exporters and importers, complicating international commerce.

In the last quarter, the main support came from government spending, which increased by 0.4%. Consumer spending remained sluggish, rising just 0.2%, while business investment fell by 2.7%, the sharpest decline since 2021. The report also noted that net trade negatively affected output, as the deficit in goods and services widened.

The ONS added that, although Chancellor Rachel Reeves's November 26 budget avoided further immediate negative effects, businesses and consumers remained cautious in December.

Despite the negatives, the economy expanded by 1.3% for the full year 2025—compared with 1.1% in 2024 and well above economists' forecast of 1.0% at this time last year. Those figures confirmed that the United Kingdom was the fastest-growing European member of the G7 advanced economies. However, the growth was uneven: stronger expansion occurred in the first half of the year, followed by weaker performance in the final six months. Business investment remained roughly at previous levels, rising by 3.5%.

As noted above, the currency market practically did not react to the released statistics.

As for GBP/USD, buyers of the pound sterling should capture the nearest resistance at 1.3660. Only that will allow them to target 1.3705, above which a breakout would be challenging. The extended target is around 1.3730. If the pair falls, bears will try to seize control at 1.3610. If they succeed, a break of that range would deal a serious blow to bullish positions and could push GBP/USD down to 1.3580 with scope to extend to 1.3545.

The material has been provided by InstaForex Company - www.instaforex.com