Limited Downside for the Pound Despite Weaker Jobs and GDP

With American data still on hold after the recently resolved shutdown of the government, many traders’ focus shifted in the first half of November to Britain amid a number of key releases, including the job report and GDP. Despite generally negative results with GDP lower than expected and unemployment rising to 5%, the pound hasn’t lost strength consistently except against the euro. This article summarises the latest British data, then looks briefly at the charts of GBPUSD and EURGBP.

11 November’s British job report was significantly weaker than expected, with claimant count change up more than the consensus and employment surprisingly rising to 5%:

September’s British unemployment is the highest in more than four years and the second consecutive higher figure. Combined with the claimant count change for October rising about 29,000 against around 20,000 expected, the latest job report suggests that Britain’s labour market is weakening, which might give some rationale for the Bank of England to continue cutting rates in December. However, there was a large downward revision to last month’s claimant count change from about 26,000 to only 400.

Preliminary quarterly British GDP on Thursday, 13 November, was a hotly anticipated release both for its potential effects on the BoE’s future policy and, crucially, the Chancellor’s upcoming Autumn statement. While it doesn’t show contraction, GDP grew less than expected:

Production was one of the biggest areas contracting last quarter, contributing to the consensus of 0.2% growth being missed, as production of vehicles especially tanked amid the major cyberattack on Jaguar Land Rover PLC. Annually, GDP rose 1.3%, slightly lower than the consensus of 1.4%.

Although none of the major releases in the week to 14 November from the UK were extremely bad and some minor ones, like business investment and goods trade balance, were less bad than expected, earlier predictions of lacklustre performance by the British economy seem to be broadly correct. This is potentially a challenge for the pound further ahead, but in the immediate future, it seems that political instability around the expected tax hikes this month might be priced in.

For many weeks now, traders have regularly been reading about the government’s fiscal rules: sentiment seems to be slightly positive or at least neutral on Chancellor Rachel Reeves’ determination to follow these rules and most likely hike taxes on middle and higher earners. Obviously, that’s likely to challenge growth further, but for many, the memory of Liz Truss’ disastrous premiership remains fresh. Traders should prepare for high volatility around the budget on 26 November.

Cable Seems Reluctant to Push Lower

Although recent British data have generally been negative, with particular focus on the job report and GDP, cable hasn’t continued its decline from the beginning of November and instead shows some signs of strength. There’s now some evidence of economic headwinds in both countries amid generally higher unemployment compared to the second quarter. Although tariffs have moved out of focus for now, monetary policy remains a key concentration, with the current near parity in rates likely to persist into next year.

The upward crossover of the slow stochastic within oversold, coinciding with the fairly strong bounce from 5 November, might normally be a buy signal, but it’s not clearly supported by volume, which has dropped compared to the end of last month. If the price can break above the 20 SMA, it might be possible to see continuation to $1.33 further ahead, depending on incoming data.

$1.30 is a likely support as a round number and the source of the bounce from 5 November, but it’s not confirmed as a significant area yet, having been tested recently only once. A push lower supported by volume, which breaks through $1.30, might open the door to a test of the 50% weekly Fibonacci retracement around $1.295. The critical release in the near future is British inflation on 19 November; the annual headline figure is currently expected to go down slightly to 3.7%.

Euro-pound Reaches 30-month Highs

EURGBP’s uptrend has continued in November so far, with the price reaching 88.4p on 13 November, its highest since April 2023. Sentiment on the pound has been weaker recently amid political instability: taxes are likely to rise on 26 November, which would be unpopular and breach the government’s promises in its manifesto, and speculation of a leadership challenge against the prime minister has risen sharply since 10 November. However, the balance of economic data is slightly negative for both the eurozone and Britain, and it’d be very unlikely to see significantly less divergence in monetary policy before spring 2026.

The overall uptrend appeared to lose momentum over the summer, but this has returned within the last fortnight or so, despite volume remaining low. 90p is an obvious potential resistance in the medium term, but before that, the price would need to break February 2023’s high around 89p. Ongoing momentum upward probably depends on volume increasing; if it doesn’t, the price might be more likely to find a range or possibly retrace lower.

The current overbought situation based on Bollinger Bands might suggest a move lower before any possible new high. All of the moving averages, 20, 50, 100, and 200, are possible dynamic supports, but in the context of seemingly limited demand for selling, the value area between the 20 and 50 SMAs is in particular focus. 87.5p might be the source of a new upward wave if the price does move down, but this depends very much on the reaction to British inflation on 19 November.

This article was submitted by Michael Stark, financial content leader at Exness.

For the latest analysis, ideas for trading and more, follow Michael on X: @MStarkExness.

The opinions in this article are personal to the writer; they do not represent those of Exness. This is not a recommendation to trade.