Pound Declines As Soft U.K. GDP Data Lifts Rate Cut Hopes

(RTTNews) - The pound weakened against its major counterparts in the European session on Wednesday, as weak U.K. GDP data for October raised hopes that the Bank of England will cut interest rate sooner than expected.

Gross domestic product unexpectedly shrank 0.3 percent in October, partially offsetting growth of 0.2 percent in September, according to the Office for National Statistics. Analysts expected GDP to remain flat in the month.

On a yearly basis, GDP expanded 0.3 percent but much weaker than the 1.3 percent growth logged in September and economists' forecast of 0.6 percent.

Another report revealed that the visible trade deficit widened to GBP 17.03 billion in October from GBP 14.29 billion a month ago. The expected shortfall was GBP 14.1 billion.

U.K. stocks rose and Gilt yields fell as GDP data increased the possibility of a rate cut earlier in 2024.

The pound depreciated to a 5-day low of 1.2509 against the greenback and a 2-day low of 182.24 against the yen, off its early highs of 1.2571 and 183.14, respectively. The pound is seen finding support around 1.22 against the greenback and 176.00 against the yen.

The pound moved down to a 1-1/2-month low of 1.0958 against the franc and near a 2-week low of 0.8616 against the euro, from its early highs of 1.1002 and 0.8583, respectively. The pound is poised to challenge support around 1.07 against the franc and 0.88 against the euro.

Looking ahead, U.S. PPI for November will be released in the New York session.

At 2:00 pm ET, the Fed announces its decision on interest rate. The central bank is expected to keep rates on hold in the range of 5.25 percent - 5.5 percent.